Izza added that the Indonesia Internet Exchange (IIX), which is the national interconnection point for Internet Service Providers in Indonesia - launched in 1997 - operated by APJII, has established nodes (connection point) in Medan, Pekanbaru, Batam, Palembang, Bandung, Solo, Jakarta, Semarang, Yogyakarta, Surabaya, Denpasar, and Malang. Over the next two years the IIX wants to have established a node in every provincial capital city in Indonesia.

Recent data from eMarketer show that around one-third of the Indonesian population are active social media users (platforms such as Facebook, Instagram, Twitter, Line, Whatsapp and Path). It is interesting to note that Indonesians not only use these platforms for communication but also as e-commerce platforms for small and mid-sized enterprises.

eMarketer added that the number of smartphone users in Indonesia is expected to rise from 55 million in 2015 to 92 million in 2019 on the back of Indonesia's economic growth, the availability of affordable 4G smartphones on the Indonesian market and further development of Indonesia's 4G network. Currently Indonesia is already the third-largest smartphone market in the Asia-Pacific region (after China and India).

Smartphone Growth in the Asia Pacific:

Number of Smartphone Users
(in million)
 2015 2016F 2017F 2018F 2019F
China  525.8  563.3  599.3  640.5  687.7
India  167.9  204.1  243.8  279.2  317.1
  55.4   65.2   74.9   83.5   92.0
Japan   51.8   55.8   58.9   60.9   62.6
South Korea   33.6   34.6   35.6   36.5   37.0
Philippines   26.2   29.9   33.3   36.5   39.2
Vietnam   20.7   24.6   28.6   32.0   35.2

Source: eMarketer

Growing Internet and smartphone penetration in Indonesia is supported by the government's plan to develop an information highway with broadband services for all 514 regency and municipal capital cities across the country by 2019 (through the Palapa Ring project). This project involves the development of 11,000 kilometers of undersea fiber-optic cables, divided into three sections: (1) west, (2) central and (3) east. Whereas 4G markets in advanced economies such as the USA and Japan have become saturated, Indonesia still offers a new and attractive market for 4G technology with 60 percent of the population still being offline. After India and China, Indonesia has the highest amount of citizens who are not connected to the Internet.  

The rising number of Indonesian Internet and smartphone users will surely boost Indonesia's e-commerce industry. Last year, The Indonesian E-Commerce Association (idEA) estimated that the number of Indonesian online shoppers will touch the figure of 10 million in 2016, implying earnings in Indonesia's e-commerce industry should more than double to IDR 20 million this year. By 2020, the idEA expects the online retail industry to account for five percent of Indonesia's economy (from 0.7 percent in 2015).