Indonesia’s Minister of Communication and Informatics (MoCI) recently organized a discussion on a draft regulation concerning over the top (OTT) applications and content, in which HPRP had the honour of participating. As OTT services include most app platforms and content services platforms that use the internet in providing services, the regulation will impact most internet business players.
E-commerce, fintech, online games and social media will all be deemed OTT for the purposes of this regulation. However, the regulation will only apply to OTT providers conducting activities in Indonesia through Indonesian internet access and earning income from OTT users in Indonesia via, among others, sales and marketing, advertising, customer databases, and/or electronic transactions through OTT services.
The regulation’s aims are to increase taxes collected from online activities and create a level playing field for local and foreign OTT providers. Foreign OTT providers need at least a permanent establishment in Indonesia.
Foreign OTT providers must register their services before providing services by submitting an Indonesian tax ID number, details of services, and a contact centre. If a foreign OTT has established a foreign investment company in Indonesia, it must submit its principle licence or permanent business licence issued by the Indonesian Investment Co-ordinating Board. The MoCI will review documents submitted and issue a proof of registration.
In OTT operations in Indonesia, certain activities must be conducted in Indonesian territory, including signing contracts, delivering services, and payment for services. Hopefully, this will do away with disputes where legally a transaction has occurred, and the Indonesian government will have the authority to collect tax on online transactions.
All OTT players who earn income from the Indonesian market should consult their tax and legal advisers to structure their transactions to minimize negative impacts and maximize their operations in Indonesia.
Privacy, filtering, safe harbour
Currently there is a safe harbour policy for e-commerce marketplace platforms that have difficulties in providing a content filtering system and censoring mechanism, so they will not be directly responsible for all posts by marketplace sellers. Nevertheless, the OTT system must still have a content filtering system and censoring mechanism. This means that although there is a safe harbour policy, OTT providers must comply with the government of Indonesia’s instructions to erase content/posts if such posts or content on the OTT are deemed to be illegal under Indonesian laws and regulations. The OTT database must be kept for three months, unless a case or regulation requires retention of the data according to the regulation, or until a court decision is final and binding.
Compensation of users’ losses
The regulation limits compensation for user losses to direct losses caused by the OTT provider. This means only users who actually incur losses may claim from the OTT provider and the user may only claim an amount in line with the actual consequences of the OTT provider’s actions. No merely probable consequences will be recoverable by the user.
Under the regulation, OTT providers must provide a service centre that will respond to all users’ questions and complaints within 48 hours. Hopefully, the regulation will explain whether the OTT provider can engage a contact centre services company in Indonesia.
As OTT has a broad definition, each type of OTT must also examine other regulations that specifically govern the business model of the OTT. Some of the obligations only concern a specific type of OTT, for example, the safe harbour policy only applies to e-commerce marketplaces but not to other platforms. This will make other platforms individually responsible for the content that they, or anyone, posts on their platform (i.e., websites, apps, online games and social media).
Some provisions overlap with other regulations. For example, in this regulation the OTT provider has no obligation to have an agreement with a network provider. However, in other regulations a content service provider must co-operate and have an agreement with a network provider
The MoCI’s sanction for OTT providers that do not perform their obligations under the regulation is bandwidth management, which may take the form of blocking the OTT services. Besides having the right to instruct network providers to impose bandwidth management sanctions on the OTT, the MoCI also has the right to impose sanctions on a network provider if the provider does not comply with MoCI instructions.
Al Hakim Hanafiah is a partner at HPRP Lawyers and Mika Isac Kriyasa is a senior associate with the firm
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