The Indonesian government plans to block over-the-top (OTT) applications that fail to meet the state regulation on permanent business entities.
Rudiantara, Minister of Communication and Informatics, said his department is finalizing a bill related to the obligations of permanent business entities for OTT players operating in Indonesia. The bill is expected to be released in March 2016.
The minister said the rule will stipulate a transition period for these OTT developers to meet the requirements.
“The punishment is easy technically, they will be blocked by the cellular carrier,” he said on Wednesday, February 24.
Rudiantara also said that he does not want these OTT developers to only open branches in Indonesia. Instead he wants them to become an incorporated business entity in the country,
The OTT players, he said, can also opt to establish a joint venture or form a partnership with local cellular carriers.
According to Rudiantara, this is the government’s way of protecting Indonesian consumers. The regulation, he said, can also pool in tax potentials that Indonesia are losing since the OTTs are not a legal entity working in Indonesia.
As an example, he said that in 2015 the value of digital ad revenues from Indonesia stood at US$430 million. “If these ad revenues are imposed a 10-percent income tax, the state could get US$43 million,” he said.
Some time ago, the Indonesian Telematics Society (Mastel) urged the government to block foreign OTTs that have been operating for quite a long time in Indonesia without contributing anything to the state; only making Indonesia a market to rake in profits.
Mastel Institute chairman Nonot Harsono projects the growth of foreign OTTs in Indonesia will be more significant, as indicated by the rapid growth of the country’s internet and smartphone users.
“Most of these OTT players are running their business in Indonesia without licenses; like LINE, Whatsapp, Kakao Talk, Netflix, and plenty of others. They should have filed for a license first if they wish to sell here,” he said.
Of Indonesia’s 255.5 million citizens, 72.2 million are active internet users. Meanwhile, the number of smartphone users in the country has exceeded the population with 308 million.