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Indonesia’s Bans on Netflix and Tumblr: Is it the Porn or the Taxes?

Following recent bans of digital content services Netflix and Tumblr in Indonesia, entrepreneurs and netizens speak out about the government’s motivations.

In recent weeks, Indonesia has gained international media attention, being called out as the country that is blocking access to popular American media sites and services. Netizen chatter began in late January when Telkom, Indonesia’s largest network service provider, blocked the popular TV and movie streaming service Netflix. Although it was only a single internet service provider (ISP) that blocked the site, a more worrying conversation began to stir: Would other ISPs follow suit? Would Netflix be blocked all over Indonesia?

For now, none of the other telcos seem to have taken cues from Telkom. Representatives from the state-owned firm initially cited pornographic content and violence as the main reasons for blocking Netflix. Officials later revealed that Netflix was blocked because it didn’t have official documentation, nor did it have permission to do business in Indonesia. In the days that followed, Telkom opened up access to Netflix once again temporarily, but only to let users cancel their subscriptions. This indicated the service would soon once again be blocked.

In a similar situation, on February 17, the popular internet blogging service Tumblr was blocked in Indonesia, and accused of hosting pornography. Following hours of unrest from Tumblr’s Indonesian user base, the service was restored. The Ministry of Communication and Information sent a request to Tumblr, asking it to “self-censor its porn content.”

Two years ago, world-renowned forum Reddit and its image hosting counterpart Imgur were blocked for the same reasons. Popular video hosting platform Vimeo suffered the same fate shortly after.

The Tumblr incident marks the fourth major foreign internet company to be blocked in Indonesia. But the news raises more concerning questions from the public about net neutrality and government censorship. At the moment, there seems to be no consistency with regards to whom or what gets blocked. The government claims the Tumblr ban was part of a larger crackdown on pornography that included nearly 500 websites. However, none of the other sites had a user base as big as Tumblr’s.

The biggest problem with the government blocking services like Tumblr and Netflix is that the sites do not actually feature porn. They may provide or host content with nudity or explicit material, but nothing that can reasonably be called pornography – you wouldn’t be able to watch Naughty Nurses 12 or You’ve Got Tail on Netflix. Reddit, however, does directly host content that is qualified as porn.

Many have criticized the bans as nothing more than the government’s attempt to get big foreign companies to pay taxes in Indonesia. Some believe explicit content is merely an excuse to try and force companies to either exit the country or hand over the cash.

Tempo recently said the government also plans to block over-the-top (OTT) applications such as LINE and WhatsApp that are also unlicensed. Rudiantara, the nation’s ICT Minister, says his department is finalizing the rules that services classified as OTT apps will have to abide by in order to operate in the archipelago. The rules seem to cover more than just opening an office in the country and paying taxes, as the prominent messaging service LINE already has an office in Jakarta.

Rudiantara says companies would be required to create new business entities in Indonesia, and the government would also seek to place them in joint ventures with local telcos. Failure to comply would result in the service being blocked by cellular carriers, reports Bisnis Indonesia. Rudiantara’s reasoning behind the proposed regulation is that it gives the government a way to gain back tax money that Indonesia has been ‘losing’. The minister says that the value of digital ad revenues from Indonesia stood at US$430 million last year, and if the government had imposed even a 10 percent tax, that would have resulted in US$43 million for the state.

The government has also been facing pressure from local societies, such as the Indonesian Telematics Society (Mastel), which has been pressuring it to block foreign companies from using Indonesia as a place to “rake in profits”.

“[It’s all about] taxes of course,” says Aryo Ariotedjo, Managing Partner of Grupara Inc., a venture capital firm in Jakarta that backs early stage tech companies. “Netflix has the ability to disrupt the content industry in Indonesia, something that hasn’t been done yet. Allowing Netflix to do that without paying taxes would be much more costly for Indonesia,” Ariotedjo tells Indonesia Expat.

Shinta Dhanuwardoyo, a local tech leader and CEO of Jakarta’s famous interactive digital agency Bubu, has other ideas on how the Netflix issue should have been handled. “Rather than blocking the service, the government should deploy a rule regarding local content,” she says. “We need to see Netflix as a competitor that we can learn from. As Indonesians, we are the ones that have the local knowledge and insights.”

Dhanuwardoyo believes there are many local technopreneurs who can learn from foreign companies.

Indonesia banning and refusing to work with foreign firms could result in a slew of missed opportunities for local tech startups.

It’s difficult to interpret the government blocking Netflix and Tumblr as merely a “pornography issue”. The inconsistency with which Indonesia blocks websites also suggests that it doesn’t care about small foreign companies that turn little profit. Instead, some believe the government is only shaking down the rich ones. For Telkom, the swift blocking of Netflix seems strategic. By cutting the company’s service before it gained a foothold in Indonesia, Telkom may have been protecting its own digital content streaming investments.

At the moment, it looks like only the big start-ups – either those with large user bases, or those with potential to earn a great deal of money – are being targeted by the Indonesian government. Meanwhile, if sizeable foreign companies wanted to do business safely in Indonesia, they too would have to incorporate locally and pay taxes.

This may be unrealistic for some firms, which is why the Investment Coordinating Board has been working to revamp the Negative Investments List. It claims that the government wants to stay open to the idea of foreign ownership in the archipelago.

 

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