Palapa optic fibre network project gets the green light

The Indonesian government announced last year that it was set on spending over US$420 billion—a huge fraction of which was to come from the private sector on infrastructure projects, but more particularly on telecoms projects.

While it is true that no developing Asian country is an exception in having a dire need in building an efficient telco infrastructure, it is critical to note that Indonesia's volume of data traffic is forecast to grow by a factor of six, from 84 exabytes last year to 656 exabytes by 2020, according to the study The Digital Universe. This fact reinforced the local telco giants to offer optical fibre lines to develop and set up high-speed data transmissions nationwide.

Indonesia's Communications and Informatics Minister Rudiantara wants to ensure the push for telecoms infrastructure is efficient not only in the greater Jakarta area but also nationwide. In a pivotal point in the local telecoms infrastructure, 4G service in Surabaya, Indonesia's second largest city, was launched last year. The mayor of Surabaya, Tru Rismaharini aims to transform her city into a "smart city" with an interconnected IT framework that will aid government administration, enhance traffic control and tighten security. Rismaharini believes that 4G technology is a necessary tool in developing Surabaya, and not just be used for commercial purposes.

Reducing the digital divide

In part of the local government's efforts to reduce the digital divide, which is cited as one of the catalysts for cultural differences and education gaps across the archipelago, the Indonesian government has launched the Rp1.28 trillion (US$96.4 billion) Palapa Western Ring Package optic fibre network service project by signing a cooperation agreement with PT Palapa Ring Barat (Moratel-Ketrosden Triamitra consortium).

The agreement was signed at the Finance Ministry building in a ceremony witnessed by Finance Minister Bambang Brodjonegoro on Monday.

"With this project, we want to narrow the infrastructure gap between regions in and outside Java," Rudiantara, who was assigned as the Person in Charge of the Cooperation Project (PJPK), noted after the signing of the agreement.

The Palapa Ring projects constitute the backbone of the national optic fibre to be built in regions that will link all districts/municipal cities in Indonesia. The optic fibre network was part of the efforts to increase access to information and provide more opportunities to the people for further prosperity.

This could be in the form of facilitating e-commerce facilities.

Of the three Palapa optic fibre ring projects, the first is the West Package which will link areas in the provinces of Raiu, Riau Islands and Natuna Island with 2,000km long total optic fibre cable.

The second is the Middle Package which will cover Kalimantan, Sulawesi and North Maluku, with an optic fibre cable length of 2,700km. The third, called the East Package, will cover East Nusa Tenggara (NTT), Maluku, West Papua and Papua with a total optic fibre cable length of 6,300km.

Project implementation, target timelines

Rudiantara's target is to begin the construction of Palapa West and Middle Ring projects in 2016 and have these operational by January 2019.

"For the East Package, the government will again float its tender, hoping that the winner will be announced by the third quarter of 2016," the minister said.

The Palapa optic fibre ring programme is the first government-company cooperation project (KPBU) in the telecommunications sector with an availability payment (AP) scheme. They payment will be made periodically during the concession period, based on the availability of infrastructure put in place by the company.

The AP funds will come from the universal service obligation (USO) contribution.

"With this system in place, the project will not depend on the state budget from which the scope of fund allocation for infrastructure development is limited," Finance Minister Bambang Brodjonegoro, said.

The West Package project has a NPV AP fund of Rp1.71 trillion (US$128.3 billion) which will be paid periodically during the 15 years concession period. The government guarantees the continuity of this payment through PT PII infrastructure guarantor company.