Monday, July 22, 2013

Indonesia Regulators to Raise SIM Prices Two Orders of Magnitude

One of the more basic economic insights is that raising the price of a product reduces demand for that product. 

So it is that Indonesia’s Telecommunications Regulatory Body plans to hike the price of subscriber information modules to a minimum of IDR 100,000 ($10), from current prices as low as IDR 2,000 ($0.2).

That might sound like a clear anti-consumer move. But the rationale is more nuanced. Monthly churn in the Indonesian mobile market is about 20 percent a month, meaning the equivalent of a complete turnover of the national customer base every five months.

Whatever difficulties that poses for service providers, it also is a consumer problem to the extent that all that churn is accompanied by a high rate of customer telephone number turnover.

The culprit would seem to be the high use of prepaid service enabled by mobile SIMs. In this case, the regulator hopes to reduce the amount of churn, and the associated number of inactive telephone numbers.

There is another angle, though. Regulators say higher SIM prices will reduce the use of “SIM boxes” that can fraudulently route international calls so that it appears to the telco to be a local call.

Such practices are not terribly unusual, and cause an estimated service provider revenue loss of US$77 million every year in Indonesia.

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