Client Newsflash

Government Proposes Regulation for Internet-Based Applications and Content Services

Rapid growth in the telecoms sector, mainly triggered by the penetration of Internet usage, will continue and certainly accelerate in the future. The emergence of Over-The-Top (“OTT”) services, i.e., online content, applications and services, has rapidly allowed telecoms customers to access numerous services in addition to basic fixed and mobile telephony. At the same time, the legal sector is hard-pressed to keep up with the fast growing developments.

On March 31, 2016, the Ministry of Communications and Informatics (the “MoCI”) issued Circular Letter No. 3 of 2016 on Provision of OTT (the “Circular Letter”) aiming to provide clarity on the obligations of OTT service providers, as well as prohibitions attaching to the sector.

In an effort to introduce a new regulatory environment for OTT service providers, the MoCI opened a public consultation in relation to its proposed OTT regulation on April 29, 2016 (the “Draft Regulation”). Interested parties had until May 12, 2016 to submit comments. However, to date, the Draft Regulation has not been issued by the government.

The key provisions in the Draft Regulation are as follows:

♦  Regulatory Framework for OTT Services

Under the Draft Regulation, OTT services comprise internet-based applications and content services, which are defined as follows:

  1. Internet Based Application Services (Layanan Aplikasi Melalui Internet) is defined as the utilization of software that allows communication services in the form of short texts, voice calls, video calls, electronic mail, chatting/instant messaging, financial and commercial transactions, data storage and retrieval, games, social media networks, and their derivatives that utilize Internet access through a telecommunications network provider; and
  2. Internet Based Content Services (Layanan Konten Melalui Internet) is provision of digital information, which may be in the form of writings, voices, images, animation, music, video, film, games, or a combination or parts of all of the above, including in forms that are streamed or downloaded by utilizing telecommunications services through a telecommunications network provider.

OTT service providers may be Indonesian or foreign, either individuals or business entities. Despite this, Indonesian service providers are able to establish a corporation or non-corporate entity, whereas foreign service providers must be registered as a Permanent Establishment (Bentuk Usaha Tetap – the “BUT”) in accordance with the prevailing tax laws and regulations.

Whether individuals or business entities, OTT services providers must register a business form and its activities with the Indonesian Telecommunications Regulatory Body (Badan Regulasi Telekomunikasi Indonesia – “BRTI”) not later than 30 working days before the launch of their OTT services in Indonesia. Registration requirements include a Deed of Establishment and its amendments Minister of Law and Human Rights approvals and notification receipts for business entities, Principal License or Permanent Business License issued by the Investment Coordinating Board (Badan Koordinasi Penanaman Modal – “BKPM”) for foreign entities, copy of appointment as a BUT for foreign entities, Taxpayer Registration Number (Nomor Pokok Wajib Pajak – “NPWP”), Certificate of Domicile (Surat Keterangan Domisili – “SKDP”), type of OTT service, and center for contact in Indonesia.

♦  OTT Service Provider Obligations

The Draft Regulation sets forth several obligations that must be followed by OTT service providers. This includes provisions on monopoly and unfair business competition practices, trade, consumer protection, intellectual property rights, broadcasting, films, pornography, anti-terrorism, taxes, transportation and logistics, tourism and hospitality, finance, and health, among others. OTT service providers must carry out data protection and data privacy, content filtering and censor mechanism, utilize/integrate national payment gateway system by Indonesian legal entities for paid OTT services, use Indonesian internet protocol numbers, grant access for lawful interception by authorized government institutions, and include information and guidelines to use the service in Indonesian language.

♦  Content Restriction

In addition to the above obligations, OTT service providers are restricted from providing services or content that: conflict with the Indonesian Constitution and prevailing laws and regulations; threaten the unity of the Republic of Indonesia; may raise conflicts between groups, ethnicities, races, religions and sects; degrade, harass, or tarnish religious values; encourage the public to engage in unlawful acts, violence, narcotics, psychotropic and other addictive substances; degrade human dignity; violate decency; or constitute pornography, gambling, humiliation, extortion or threats, defamation, hate speech, or copyright infringement. If the contents are not directly provided by the relevant OTT service provider, the said provider must inform or socialize such matters relating to the restriction of such content to partners or direct providers of such content.

♦  Center for Contact Information

OTT service providers are obliged to provide center for contact information, which at least include a phone number, email address for complaints, and/or user’s service site. The center must have a facility to service questions and complaints from users.

♦  Data Storage

OTT service providers must record all transactions and service traffic for at least 3 months. For legal proceedings, OTT service providers must maintain all data that are directly involved with a given court proceeding based on the request of law enforcement until such proceedings reach a legally binding decision.

August, 2016

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The foregoing material is the property of AKSET and may not be used by any other party without prior written consent. The information herein is of general nature and should not be treated as legal advice, nor shall it be relied upon by any party for any circumstance. Specific legal advice should be sought by interested parties to address their particular circumstances.

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