Indonesia May Force Web Giants to Build Local Data Centers

The Indonesian government could act as early as February on a long-feared threat to force electronic information providers including Internet search engine giants such as Google and Yahoo to begin building data centers in the country, critics say.

A statement by Nonot Harsono, a member of the Indonesian Telecommunications Regulatory Authority, that he doubted that the new regulation would force the Internet giants to build data centers hasn’t alleviated concerns.

The requirement to force the search engines to establish local facilities has to be seen as a part of the growing web of economic nationalist regulations being implemented by the government to circumscribe multinational activities across a wide spectrum of business operations. Earlier this week, the government threatened to enforce huge fines on multinational mining companies that do not build local smelters to process ore before it is shipped overseas.

The Technology and Information Ministry is circulating a draft regulating technical guidelines for the data centers, which according to the ministry’s chief of public relations Gatot S. Dewa Broto, “covers any institution that provides information technology-based services.” That theoretically includes hotels, banks and airline services as well as the search engines.

Indonesia is one of at least 13 countries across the globe that have implemented or intend to implement so-called local data server requirements, which the United States and the European Union object to as a threat to the free flow of lawful information which could “result in a slowing of technological innovation and prevent companies from offering certain products and services, consequently dampening economic growth,” according to the US-based Business Roundtable, an association of the chief executive officers of major US corporations.

Local data server requirements, the Business Roundtable said, “hurt economic productivity and dramatically undercut the efficiencies and scalability made possible by cloud computing and networked technologies.”

The issue came up in Jakarta as long as three years ago, when the government went after Research in Motion, Ltd., with a threat to force the manufacturer of the popular Blackberry smartphone to build a local data center. RIM refused, citing a threat to the confidentiality of information of its 5 million-odd users in the country.

Today the situation remains unclear. While Gatot told local media that the bill is expected to come into effect by mid-February, the draft is still under discussion. He declined to give further details. There are questions over the definition of providers of “public services,” which under the regulation are defined as government institutions, according to an analysis of the bill by the American Chamber of Commerce in Indonesia, or Amcham Indonesia, should mean government institutions.

One of the provisions of the Indonesian measure stipulates that every electronic system provider for public services that operates a data center is required to locate a data center and disaster recovery center within the Indonesian territory

The key in the bill, however, is the definition of “public services,” which for companies under the regulation defines public services as government institutions, according to an analysis of the situation by the American Chamber of Commerce in Indonesia, or Amcham Indonesia. According to a 2009 public service law, however, a public service organization is defined as any state institution, corporation, or independent organization established to provide a public service, and any legal entity established solely for public service activities.

On Jan. 7, the ministry announced a public consultation for a draft regulation on data center technical guidelines that lays out technical standards such as design and operational requirements. It is in the process of issuing several technical regulations concerning domain name registration, trustmark certification agency, spam, electronic system governance, domain name management and electronic certification operation.

The regulations for the management of the domain name and the governance of electronic systems for government institutions are already available and were not open to public consultation as they applied only to government stakeholders.

For its part, Google Indonesia told local media regulations on local data centers for foreign content providers was not yet feasible.

“Based on the definition, can an over-the-top provider like Google be categorized as a public service institution?” Shinto Nugroho, Google Indonesia’s head of public policy and government affairs, told Investor Daily last week.

Shinto also noted the country’s inability to provide massive amounts of electricity required to power gigantic data centers such as those operated by Facebook, Google and Yahoo. Facebook’s server farms in the United States alone used 673 million kilowatt hours in 2012. That was equivalent to 0.5 percent of Indonesia’s power production in the same year.

“It’s not only about the clarity of the rule, they should also consider how the rule can be implemented,” Shinto said.

Nonot said the Indonesian government and companies should find a way to reach “mutual respect and mutual benefit.”

“Companies would definitely consider financial matters, but that shouldn’t be a such a big burden for them if they respect our country,” she said.

Despite some reluctance on the issue, both Nonot and Gatot voiced optimism that the Internet giants will cooperate, keeping in mind the number of Indonesians using Google and Yahoo services.

Multipolar Technology, a listed information-technology company, is spending $100 million to build a data center in Cikarang, West Java. The data center will cover an area of 12,000 square meters and is scheduled for completion this year.