The Internet is expensive, who is responsible?

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Hironantou

The president aspires to develop the Internet in Indonesia, starting with building the nation’s capital with the concept smart city Global reference, expand 4G to 12,000 overseas villages, establish national data center, etc. Finally, on the anniversary of Parahyangan Catholic University (January 17, 2022), the President reiterated that the government will enhance the digital economy and transform digital society by developing infrastructure that supports digital transformation (Building Satellite, BTS/base transceiver station, and so on). This policy is essential to achieving a digital economy that creates jobs, investment, and productivity.

At the coordinating ministerial level, there is no shortage of enthusiasm for the development of the Internet. Although on December 12, 2021, at the Indonesia Fintech Summit 2021, Coordinating Minister for Maritime Affairs and Investment (Minku Marvis) acknowledged the obstacles to the development of the digital economy and said that “Indonesia’s Internet is slow, expensive and uneven”, even that many villages You did not enjoy the Internet. In other words, the Internet can only be accessed by those who can afford it economically.

This must be admitted, the government has deregulated to encourage ease of doing business, through the Job Creation Act that reduces some regulations. However, there are still other obstacles hindering the progress of the Internet in Indonesia.

Read also: The digital divide is widening

If we focus on “expensive internet tariffs” and their relationship to government, we will find that government through its policies actually contribute to “encouraging” or “discouraging” business development and prices of goods/services. The high price of the Internet is only the “tip of the iceberg” of many unfulfilled problems in the private sector (business actors) and the public sector (government policy).

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The role of the government

Consumers, business actors (private sector), and government play a role in shaping the prices of goods/services in society. The private sector generally shapes prices through commercial competition, raw material prices, and costs overhead, and so on. However, the government also has a role in the cost component of the price of the product in the society. The role of government is shaped by tax policies (levies) and regulations.

In a study entitledHow do federal regulations affect consumer prices?Analysis of the regressive effects of regulation(2016) by Chambers and Collins, conclude that when government issues new regulations, this will affect business costs (The cost of doing business), and business actors tend to pass on these costs to consumers by increasing the prices of goods.

When the government issues new regulations, it will affect business costs ( The cost of doing business), and business actors tend to pass on these costs to consumers by increasing the prices of goods.

The telecommunications sector (particularly the Internet) is a sector that bears various taxes and fees, ranging from (1) income tax (PPh), (2) land and building tax (PBB) and/or taxes on active and passive infrastructure, such as the laying of submarine cables. , (iii) Various non-tax government revenues (PNBP), such as telecom operator rights fees (0.5% of total income), universal service contributions (1.25% of total revenue), frequency operating rights fees, even PNBP from leases.State property In the form of land for appointment Optical fiber. All these fees become more or less components of the formation of selling prices, so that the final price for consumers (public) becomes more expensive.

In recent years, there have been attempts by many local governments (Pemda) to generate income by charging fees (rents and/or levies) on shows. Optical fiber Through local government lands. Whereas, the legislature through the Communications Act permits the extension of communications cables through government-owned buildings and lands.

Read also: Many people live in the chaos of passive infrastructure systems

However, in reality, only a handful of these local governments apply a lease and/or tax on cable internet offerings. We can imagine if more than 500 local governments were involved in implementing the tax, how much the cost would increase. These costs will sooner or later be transferred to the price of the Internet in society.

Children benefit from free internet from the Mobile Sub-District Internet Service Center (M-PLIK) in the office yard of Kelapa Lima Village, Merauk District, Merauk Regency, Papua, Thursday (4/7/2013).  M-PLIK serves internet access to remote villages, border areas and pilot areas by the government.
Compass / Hendra Setiawan

Children benefit from free internet from the Mobile Sub-District Internet Service Center (M-PLIK) in the office yard of Kelapa Lima Village, Merauk District, Merauk Regency, Papua, Thursday (4/7/2013). M-PLIK serves internet access to remote villages, border areas and pilot areas by the government.

Regulation

Regulations also have a significant impact on the progress of the business sector. Regulations can be used to “encourage” or “discourage” business. Democratic People’s Republic of Korea, President, 34 ministries, to 514 local governments that issue various regulations every year. Commercial actors and product prices are highly vulnerable to the influence of regulations, especially regulations regarding commercial competition, licensing (number and level of difficulty) and penalties (administrative and criminal).

For example, if the local government changes regulations and requires that Internet cables be moved from the shaft to the ground, the Internet operator must spend the money to build new cables underground. Although at first glance it appears “moving”, the costs incurred are approximately the same as the cost of building a new cable.

Also Read: We Can’t Run Fast in the 5G Era

Sanctions regulations also affect The cost of doing businessThere are provisions for disproportionate administrative penalties. Such as administrative penalties (fines) in network construction, where “incomplete permits” result in imaginary fines. This is because the fine is calculated based on a percentage of the investment value. While the negative effects that arise (such as environmental damage) are minimal.

If the government really intends to encourage priority sectors, then administrative sanctions for these sectors should use the principle of proportionality and be directed to the extent of recovery of the damage that has arisen, and not to seek revenue (PNBP) with a percentage of the project value. Heavy fines for administrative matters (incomplete permits) will actually discourage business actors and reduce their interest in investing.

Workers laying internet network cable sheaths in Jalan Panjang, West Jakarta, Thursday (23/8/2018).  According to a survey conducted by the Indonesian Internet Service Providers Association (APJII), the number of Internet users in Indonesia in 2017 was 143.26 million.
compass / primopod

Workers laying internet network cable sheaths in Jalan Panjang, West Jakarta, Thursday (23/8/2018). According to a survey conducted by the Indonesian Internet Service Providers Association (APJII), the number of Internet users in Indonesia in 2017 was 143.26 million.

Tax and regulatory restructuring

Taxes (state taxes) have two main functions, the budgetary function (state financing), and the regulatory function (to encourage or hinder an activity). The government must understand the function of this regulation.

For example, we can see in politics green energy In various countries, where the government intends to reduce air pollution (by reducing fossil fuel cars). So the government restructured the tax, by increasing the tax rate on fossil cars, while reducing (or eliminating) the electric car tax. Taxes (and prices) will influence consumer considerations before buying fossil cars and encourage a switch to electric vehicles.

Ministers and local governments should have policies in line with the People’s Assembly and the President in reducing taxes on the Internet sector.

If the government really intends to advance the technology sector (especially the internet), then the government should (i) record the types of taxes / levies in the internet sector, whether imposed by the ministry at the local government level, and then (ii) reduce both the tax amount or the percentage of tax rate . Ministers and local governments should have policies in line with the DPR and the President in lowering taxes on the internet sector (types and rates of taxes), even eliminating fees that have no apparent basis (such as internet cable rentals or taxes).

Similarly on the regulatory side (especially permits and penalties), the government should also start restructuring the regulations by recording the “number of licenses”, to further reduce, while at the same time providing certainty for the “period” of obtaining the permit. Moreover, the government should also change the concept of penalties (especially fines) for priority sectors, from income-generating ones (PNBP), to penalties with a payback concept.

Read also: From easy internet access to computer skills

I mean the government limits the enforcement of penalties, and applies the penalties to activities that are proven to be harmful to society and the environment, not to the administration (incomplete permits). It will be difficult to advance the Internet sector, if only the People’s Assembly and the President abolish restrictions, while at the ministerial and local government levels add taxes and regulations.

Finally, I hope that investing in the technology sector (especially the Internet) will be more assured and easier, and the people of Indonesia can enjoy an equally high-quality and affordable Internet.

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Henry D HutagaolAnd the Lecturer at the Faculty of Law UI

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