Moving into the 21st century

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There is no question that cellular phone market penetration, at least here in Jakarta, is one of the world’s great success stories. Cell phones, or handphones in the Indonesian idiom, have become as much a requirement as hats were in the 1940s; people of all social and economic strata wouldn’t think of leaving the house without one.

No longer merely a tool of in-demand businesspeople and status conscious sophistos, cell phones are never far from the ears of ojek drivers, store cashiers, even rubbish scavengers. Yesterday I saw a five year old girl in a playground, bouncing enthusiastically on a trampoline while deep in conversation, cell phone to her ear. Handphones, because of their ubiquity, are not seen as a luxury any more; they are a necessity in today’s world. And that is a service provider’s dream.

Anybody who understands marketing would love to be in the position of having to sell a service that is cool, that is utterly addictive, that virtually everyone thinks of as a necessity, and for which the demand increases every day, with no sign of slowing down. Nevertheless, those enviable market advantages were apparently insufficient for some of Indonesia‘s service providers. In June of this year, six of the country’s biggest service providers, including Telkomsel, Telkom and Smart Telecom were convicted of collusion and price fixing. They were fined over US$8 million for creating a cartel conspiring to peg SMS (Short Message Service) tariffs at artificially high levels, costing consumers over $300 million in excessive charges.

Given that there are new legal controls on the tariffs providers may charge, and that the providers had a bite taken out of their cashflow in the form of fines, the question is whether they can provide decent service to the ever-growing throng of cellular phone customers.

A quick straw poll doesn’t yield much in the way of scientific data, but does demonstrate that a pattern is beginning to emerge. While the providers themselves insist that service overall has improved and continues to get better every day, the customers have a different impression. No matter which provider a handphone user subscribes to, “Call failed — network busy” is perceived to be the increasingly frequent result of attempted phone calls.

Overloaded circuits, dead zones and sudden signal loss are more and more often the source of consumer complaints. This may be as much the result of consumer demand for higher standards as of the providers’ failures, but consumers are not apt to be patient. It is worth noting, however, that signal drop-off becomes more common at peak times due to overloaded circuits; providers see this as being a direct result of the low tariffs.

Nevertheless, one annoyance of which customers are acutely aware can only be attributed to the providers: unsolicited commercial messages.

The number one irritation mentioned by those asked about cell phone service in Jakarta was the proliferation of advertising and other spam being sent via SMS to customers. The consumer is bombarded with discounts on event tickets and myriad other “special offers”. The most commonly mentioned offender was the HSBC, in contrast to the usually dignified and restrained marketing policies of major financial institutions.

HSBC was asked about the strategy behind the use of cellular spam as a marketing device and whether there had been feedback from the consumers; unfortunately, due to time constraints, an official response couldn’t be offered.

Other marketers have suggested that their “announcements” are legitimate messages sent to people they believe will be happy to receive them. They say that they receive generally positive feedback, and that most people read them, some act upon them, and everyone can simply delete the message if it is off no immediate value to them. It seems that this is an area where consumers would have to make their views known directly to the advertiser if they truly object to such messages.

It is easy to understand the temptation to use cell phones as a means of direct access to a huge group of consumers. According to one industry expert, although Indonesia is the third largest CDMA market in the world (after China and India), there remains enormous growth potential here. Having one of the lowest teledensities in the world suggests that telecommunications growth in the archipelago will leapfrog the hardwired stage in its development, and will move directly into cellular communications as it spreads to the rural areas. The problem is that there is very limited coverage in many rural areas.

This creates an obvious area for the carriers’ corporate social responsibility obligations. The government might consider imposing a requirement that the carriers expand the technological infrastructure into outlying areas as they grow. This would be a win-win scenario, as it would both provide communications services to previously isolated regions as well as open up a whole new source of potential subscribers.

Any industry that develops as quickly as the telecommunications business has will inevitably encounter some speed bumps on the way. As the providers compete to sign up subscribers, the development of the networks themselves sometimes falls behind, causing lapses in service quality. It’s something of a chicken and egg situation. Without subscribers, there is insufficient revenue to expand the service; without high quality service, existing customers complain and it’s hard to sign up new ones.

But with a product of such enormous market potential, these problems will sort themselves out; there is far too much money at stake for the carriers to fail to put their best efforts into meeting the demand.(Patrick Guntensperger)

The Jakarta Post, July 10, 2008

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