Netflix Blocked by Indonesia's Top Telecom Provider

JAKARTA—Indonesia's biggest telecommunications provider blocked access to Netflix Inc.'s video-streaming service Wednesday, posing a significant obstacle to the company's newly launched operations in the world's fourth most populous country.

State-owned PT Telekomunikasi Indonesia Tbk., or Telkom, said it barred access to U.S. company's service after concluding that it didn't have a permit to operate as a content provider in Indonesia. It also said it objected to some of the material available on Netflix, including what it said was violent and adult content, echoing complaints made by the Indonesian Censor Board and traditional cable television operators this month.

The operator of Indonesia's largest cellular network, which accounts for more than half of the total market, Telkom also owns Internet-service providers IndiHome and Wi-Fi.id, as well as a local video-on-demand service called UseeTV.

"Netflix's content should adjust to regulations in Indonesia," said Arif Prabowo, vice president for corporate communications at Telkom, in a statement. "We take this step to protect the Indonesian people."

In response to the ban, Netflix said that it intended to comply with local laws and regulations where applicable, but implied that it didn't have to apply for permits in the same way as conventional cable networks.

"Netflix is an Internet television network, not a traditional broadcaster," a Netflix spokeswoman said. "We are an on-demand service that allows people to choose to subscribe and decide what, where, and when to watch."

Analysts say that Netflix's expansion into Indonesia, one of an additional 130 countries where the service was introduced this year, is poised to threaten local cable TV operators and the growth of the local film industry.

"Netflix has the potential to disrupt the local television and cinema industry as they have a similar target market: those who live in urban areas and like international movies," said Heru Sutadi, executive director at the Information and Communication Technology Institute, a Jakarta-based consultancy.

"They could stop paying for premium cable TV and switch to Netflix, which offers a cheaper subscription price," he said.

Indonesian regulators appeared to have been caught off guard by the sudden rollout of Netflix. Previously, they had blocked the country's 85 million Internet users from accessing video-streaming service Vimeo LLC, user-generated social network Reddit Inc. and Imgur LLC's photo-sharing service for the companies' failure to censor their content.

Ride-hailing app provider Uber Technologies Inc., which has operated in Indonesia since August 2014, is permitted to do business in the country under the condition that it establish itself as a foreign investment firm, which it hasn't yet done.

This time, Indonesian government officials have urged Netflix to talk with regulators to ensure the company complies with local laws. Minister of Information and Communication Technology Rudiantara said Tuesday that the video-streaming service should establish a legal entity in Indonesia, as most foreign providers offering Internet-based media services are required to do. He also said the company should apply for a permit to provide content electronically.

"We don't have a regulation yet for 'over-the-top' content providers such as Netflix, these business models are often ahead of the regulation," said Mr. Rudiantara, who like many Indonesians goes by one name. "Over-the -top" refers to content delivered via Internet. In lieu of regulation, "Netflix should also self-censor its contents like what local television channels have been doing," he said.

Netflix said that it already had a guidance system in place, including a feature that can prevent children from viewing certain content.

"The service includes ratings guides and episode synopses to help people make informed choices about what is right for them and their families. For those who want additional control or parental controls, we provide a PIN code system to ensure children can't view certain content," the company spokeswoman said.

Mr. Rudiantara said the government would decide next month whether to restrict access to Netflix. He said that if officials deem its content as beneficial to consumers, it would consider creating a regulation to allow Netflix and other video-streaming services to operate freely in the country.

At this time, "we won't block Netflix," Mr. Rudiantara said.

Write to Resty Woro Yuniar at restyworo.yuniar@wsj.com

(END) Dow Jones Newswires

January 27, 2016 08:05 ET (13:05 GMT)

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