How-to understand competition law regulation in telecommunication business

In 2020, there were 959 companies that have obtained permits to provide telecommunication services in Indonesia, an increase of 13.76% from the previous year. The increasing presence of telecommunication companies in Indonesia is very vulnerable to causing violations and monopolistic practices as well as unfair business competition. The potential fraud that may occur is the practice of cartels and price fixing. To foster a conducive business climate, this article provides insight for every telecommunication business actors who must know what actions are prohibited and can threaten the existence of their business in Indonesia in terms of business competition.

Governing laws and regulation 

• Law No. 5/1999 concerning Prohibition of Monopoly and Unfair Business Competition
• Minister of Transportation Decree (Kepmenhub) No. 33/2004 concerning Supervision of Healthy Competition in the Operation of A permanent Network and the Operation of Basic Telephone Services

Overview

In the operation of telecommunications, it is prohibited to carry out activities that may result in monopolistic practices and unfair business competition among telecommunications operators and compiled with Law No. 5/1999. Law No. 5/1999 defines monopoly practice as the concentration of economic power by one or more business actors which results in the control of production and or marketing of certain goods and or services so that it creates unfair business competition and can harm the public interest. Meanwhile, unfair business competition is competition between business actors in carrying out production and or marketing activities of goods or services that is carried out in a dishonest or unlawful manner or hinders business competition.

Monopoly prohibition

As regulated in Law No. 5/1999, a business actor should be suspected or deemed to be conducting a monopoly if:

1. There are no substitutes for the goods and or services concerned;
2. Causing other business actors to be unable to enter into business competition for the same goods and or services; or
3. One business actor or one business group controls more than 50% of the market share of a certain type of goods or services.

In particular, in the telecommunication business sector, Law No. 5/1999 mentioned that telecommunication network operators are obliged to guarantee the freedom of users to choose other telecommunication networks to fulfill telecommunication needs. Each telecommunication network operator is also entitled to obtain interconnection from other telecommunication network operators and telecommunication network operators are required to provide interconnection if requested by other telecommunication network operators.

Competition in fixed networks and provision of basic telephone services

Abuse of dominant position prohibition

Fixed network operators and basic telephony service providers whose business activities, coverage area and revenue dominate the majority of the market are categorized as “dominant position operators”. The operator is prohibited from abusing its dominant position to practice monopolistic practices or unfair business competition. They are also not allowed to use its revenue to subsidize costs for the operation of fixed networks and the operation of other basic telephony services that are competitive and do not have a dominant position which it also provides.

In addition, both fixed network operators and basic telephony service providers who are categorized as either dominant or non-dominant positions are prohibited from dumping or selling or operating its business at a rate lower than the cost and or providing or selling its services at a price above the rate that has been determined through a tariff formula in accordance with applicable regulations. They are not allowed to require or force directly or indirectly users or subscribers to only use the basic telephony networks and services – DLD (domestic long distance) and IDD (international direct dialing) that they provide. They also can not avoid to provide interconnection services or perform discriminatory actions to fixed network operators and other basic telephony service providers who submit interconnection requests.

Use of access codes and interconnections

The fixed network operator is prohibited from not forwarding a call if the user or subscriber connected to his network chooses another provider to channel his calls and diverts the connection to another network that is not in accordance with the user/customer’s choice without the knowledge of the user/customer concerned. They are also forbidden to close or block certain access codes and must ensure that all Basic Telephony Service Access Codes for Long Distance Direct Dialing and International Direct Dialing can be accessed from each customer terminal automatically or normally opened.

Fixed network operators are required to channel calls from their users or subscribers to the available network in accordance with the access code chosen by the user or subscriber concerned. Each fixed network operator is also required to provide the same treatment to other operators in providing interconnection services and or other services, which can be in the form of:

1. Fulfilling the need for facilities for customer service, opening access codes and handling interconnection requests, both in terms of supply time, quality, dimensions and costs;
2. Treatment of all conversational traffic, both internal traffic within its own network and interconnection traffic, which is channeled through its network;
3. Application of the same structure and amount of fees to every other operator for the utilization of resources such as ducts, billing systems, and towers;
4. Provide equal treatment to the preparation of billing data, bill receipts and billing to users.

Cartel prohibition

A cartel is a form of cooperation carried out by producers of a certain product with the aim of controlling their own products, in terms of sales and prices, which can result in a monopoly on certain industrial product commodities. 

Cartel is prohibited in Law No. 5/1999 which stipulates that business actors are prohibited from making agreements with their competing business actors, which intend to influence prices by regulating the production and or marketing of goods and or services, which may result in monopolistic practices and or unfair competition.

Provisions regarding the prohibition of cartels can also be found in the provisions of Law No. 5/1999 which states that business actors are prohibited from making agreements with competing business actors, which:

1. Intend to determine the price for the quality of goods and or services that must be paid by consumers or customers in the same relevant market (price fixing);
2. Intend to jointly control the production and or marketing of goods and or services (price fixing);
3. Intend to divide the marketing area or market allocation for goods and or services (dividing territory);
4. May prevent other business actors from conducting the same business, both for the purpose of the domestic market and foreign markets (boycott);
5. Intend to refuse to sell any goods and or services from other business actors so that the act harms or can be suspected of harming other business actors or restrict other business actors from selling or buying any goods and or services from the relevant market (boycott);

which may result in monopolistic practices and or unfair business competition.

Law No. 5/1999 also regulates that business actors are prohibited from making agreements with other business actors to:

1. Cooperate by forming a joint venture or a larger company, while maintaining and maintaining the viability of each company or its member companies, which aims to control the production and or marketing of goods and or services, so as to result in monopolistic practices and or competition unhealthy business;
2. Regulate and or determine the winner of the tender so as to result in unfair business competition. (tender conspiracy); 
3. Hindering the production and or marketing of goods and or services of competing business actors with the intention that the goods and or services offered or supplied in the relevant market are reduced in terms of quantity, quality and timeliness required (conspiracy);

which may result in monopolistic practices and or unfair business competition.

Sanctions

Law No. 5/1999 regulates several kinds of sanctions that can be imposed on violators of the Business Competition Law, which can be in the form of:

• Administrative actions such as stipulating the cancellation of the agreement, orders to business actors to stop activities that are proven to cause monopolistic practices and unfair business competition and or harm the community, stipulation of compensation payments, and the imposition of a fine of at least IDR 1,000,000,000 (one billion rupiah) and a maximum of IDR 25,000,000,000 (twenty five billion rupiah).
• The principal punishment is a fine of as low as IDR 25,000,000,000 (twenty five billion rupiah) and a maximum of IDR 100,000,000,000 (one hundred billion rupiah), or imprisonment in lieu of a fine for a maximum of 6 (six) months.
• Additional penalties such as revocation of business license, prohibition to occupy the position of the Board of Directors or Commissioners for a minimum of 2 (two) years and a maximum of 5 (five) years, and termination of certain activities or actions that cause losses to other parties.

Regulation development

The Indonesian government has made a Government Regulation Draft regarding Telecommunications and Broadcasting Posts (RPP Postelsiar) which has not been ratified until now. Several substances related to business competition are regulated in the regulation, including:

• Business activities via the internet; international telecommunications transmission submarine cable communication system cooperation
• Cooperation in the operation of telecommunications operations; determination of the upper and lower limits of the tariff for telecommunications operations
• Setting a lower limit based on market conditions that have an impact on service continuity and service quality to the community
• Cooperation in the use of frequency spectrum, including provisions regarding sanctions, and
• The right to use the frequency spectrum, including provisions regarding sanctions.

The RPP Postelsiar can be accessed through this link.