The New Economy in East Asia and the Pacific

By Peter Drysdale | Go to book overview

10

Internet providers: an industry study

Haryo Aswicahyono, Titik Anas and Dionisius Ardiyanto


INTRODUCTION

The 'network revolution' promises to make a substantial contribution to economic development in the developing world. First, the new network technology can improve economic efficiency and competitiveness. Second, it can be used for more efficient and effective education, health care and public administration. Third, it creates opportunities to exploit low factor costs in the international market. Fourth, it provides opportunities to increase social capital. Finally, new information technology creates opportunities to bypass failing domestic institutions.

The network revolution also has the potential to widen the development gap. In most developing countries, it may expose known weaknesses such as inadequate legal and commercial frameworks, shortfalls in education and knowledge, and weak network services and infrastructure. By increasing tradability in services, it will expose weak domestic services such as finance, business services, professional services and retailing to the full force of international competition. The increased volatility and instability of world markets that may accompany the network revolution also carry risks to the developing world.

This chapter addresses the question of how Indonesia can best adopt new information technologies. We argue that in Indonesia the high price of internet services is the main deterrent to the diffusion of information technology in general, and of the internet in particular. We also argue that the best way to reduce the price of the services is to make the market for internet services more competitive. By way of background, we briefly review the dynamics of the 1990s networking revolution that paved the way for the convergence of communications, information technology and the multimedia industry. We also briefly discuss the challenges and opportunities posed by the networking revolution for developing countries.

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