Indonesia’s Home Broadband Basics
To give context to all readers, home broadband is referring to the connectivity to the premises, especially residential area through cable — it can be copper (an old technology) or fiber optic (the newer tech with faster speed and more reliable).
In Indonesia, the home broadband industry has started few decades back, however, the infrastructure is still limited, the players are plenty, and the untapped population is still massive which make it quite interesting.
As comparison, the fixed broadband penetration in Indonesia is projected to reach about ~26% while penetration rate in Thailand is estimated to reach about ~63%. Both countries imply the similar numbers of subscribers at a very different penetration level, hence Indonesia has more upside and future potential from the subscribers perspective.
Unlike mobile telecommunication service infrastructure, the fixed broadband industry still has room for growth. The market is still underpenetrated which reflect the limited population coverage itself — people are calling it homepass, the premises to which an operator has capability to connect in a service area, but the premises may or may not be connected to the network.
There are xx fixed broadband players that is competing today. Of all players, the clear winner is Indihome, a home broadband brand that is owned by Telkom (the parent company of Telkomsel, state-owned mobile operators), a state-owned telecommunication company in Indonesia. It serves about 9.3 million home broadband subscribers, while the closest #2, Linknet (just recently acquired by XL), only have 0.9 million subscribers.
Reasons for slow adoption
The nationwide penetration is still less than 20% (localnews). If home broadband is not something new in the market, then we should ask the question: why the adoption is slow? There are few challenges that is being faced in this arena which hinder the adoption progress.
- Geographical Coverage & Challenges
Home broadband business is particularly challenging in a country with vast area with mountains and island with centralized infrastructure development. Most of the players are fighting over customers in the urban areas — mostly centralized in Jakarta. - High Capex
Similar to mobile telco business, the investment in home broadband business is massive. The complexity between scheduling, financing, regulatory compliance, and execution has been a factor on why the home broadband business is not always a game with fixed winner. However, whoever has the most capital will likely to win the battle. - Buying power
Indonesia telco consumers are relative unique compared to the developed countries. The majority of mobile subscribers are prepaid users — about 95% of it and the ARPU is about two — four dollars. The current average market price for home broadband is between USD 13 to USD 20 per month with the data limit around 30GB.
Although Indonesia has a promising number of population — about 270 million citizens, about 80% of the individuals are spending up to USD 78 per month. The average price of home broadband is about ~25% of the total consumption which it relatively too high for someone to spend on the internet subscription. However, with the growing use case for internet — more jobs are dependent to the internet, we may see a promising future for home broadband.
