Indonesia has one of the largest populations of internet users in the world: 50 million in 2015 according to the Indonesian Internet Service Providers Association (Asosiasi Penyelenggara Jasa Internet Indonesia, or APJII). The number is continuing to grow because most Indonesians are not yet on the internet. Indonesia also has one of the world's largest internet exchanges, OpenIXP. An internet exchange is the physical meeting point ‘at which the networks of Internet Service Providers (ISPs), telecommunications carriers, content providers, webhosters and the like, meet to exchange IP traffic with one another’; the purpose of an internet exchange is ‘to decrease network costs, to improve network performance and to make [networks] more redundant’ (https://ams-ix.net/about/about-ams-ix). Indonesia's exchange connects more than 700 ISPs, content delivery networks (CDNs), government agencies and other service providers and has a peak throughput of 277 gigabits per second.

Indonesians are very active mobile phone users. The country has more mobile phones (270 million) than it has people (250 million) because some Indonesians own more than one mobile phone. Indonesians choose their providers on the basis of coverage, or to take advantage of the promotions that are available from time to time. The large number of mobile phone users in Indonesia makes security problems inevitable.

Even before the country had developed a high degree of IT expertise, Indonesians were enthusiastically embracing information technology to solve national problems. To create more transparency around elections, for example, the government began to use the internet to relay real-time vote tallies during the presidential elections of 1999. Then, in the 2014 election, a group calling itself Kawal Pemilu (Election Guardians) mobilised large numbers of young, IT-savvy Indonesians to electronically count the results from every polling station in the country, making it more difficult to (for want of a better word) ‘hack’ the election results. The electoral system still relies on paper-based voting, but a bill to allow electronic voting is being considered by parliament.

Digital technology is fast becoming the core of life, work, culture and identity in Indonesia. In a young nation with a median age of 28 and a rapidly growing urban middle class, Indonesians are using digital technologies in ways that have made the world take notice. In 2016 Indonesia had 76 million Facebook users, the fourth highest number in the world. Jakarta has been named the world's ‘most active city on Twitter’ (Lipman 2012), while other platforms such as Instagram, WhatsApp, LINE, Path and Telegram are all being used in unique and dynamic ways. It is now commonplace to walk into a cafe in one of Indonesia's cities and see a group of young Indonesians all sitting in silence, eyes fixed on their mobile phones. Even outside the cities, there is voracious demand for admittance into the digital world. In research exploring the ‘improbability’ of a nation with over 13,0000 islands, a coastline of 54,000 kilometres and a population of 250 million with dozens of ethnicities, journalist Elisabeth Pisani (2014: 3) observed villagers climbing trees in order to get 2G phone reception; ‘Millions of Indonesians live on $2 a day and are on Facebook’, she wrote.

Indonesia's digital economy is an area of great potential, as shown by the rise of Go-Jek and Grab, ride-sharing companies whose success has been propelled by the ubiquitous use of smartphones. In mid-2016 Go-Jek raised $550 million in new capital, giving it a value of $1.3 billion, an incredible result given it had launched its first mobile phone application only a year and a half earlier (Pratama 2016). On the back of Go-Jek and other e-commerce successes, President Joko Widodo (Jokowi) stated that Indonesia aimed to have ‘1,000 technopreneurs’ and a digital economy worth $130 billion by 2020 (Tapsell 2015a; Wisnu 2016).

Politically, digital platforms are being used to organise mass rallies, assist with election monitoring and generally provide a space for greater freedom of opinion and expression on a variety of issues, contributing in no small way to the country's rambunctious democracy. Anyone running for political office must now consider how to engage with the world of online campaigning, in particular by nurturing a presence on social media. As this book explains, digital technologies have had a marked impact on the media industry, governance, commerce, informal sector employment, city planning, disaster relief, health, education, religion, artistic and cultural expression, and much more.

One of the major challenges facing scholars seeking to investigate political and ideological developments in contemporary Indonesian public life is the coincidence of two significant phenomena with distinct historical roots: regime change in 1998, and changes to the media technologies by which public life is produced, circulated and sensed. For the most part, scholars of Indonesian politics have sought to negotiate this challenge by treating new media technologies as a neutral factor that has played no role in shaping political and ideological developments. Major studies of contemporary Indonesian politics sketch a continuum on which regime change in 1998 and decentralisation in 2001—but not technological developments—feature as major turning points shaping the contours of public life.

In this chapter, I develop an alternative historical framework for analysing the ideological implications of the spread of new media. I argue that we cannot hope to understand the role of technology by positioning the digital in a post-authoritarian frame—the predominant one for analysing political change in contemporary Indonesia. There is little doubt that post-authoritarianism is useful for studying the intricacies of the formal dimensions of Indonesian democracy in the twenty-first century, but it should not be accorded primacy in the study of digital change. When we hitch the study of digital Indonesia to an agenda that seeks to understand emerging forms of political organisation by looking at society through the lens of elections, parties, social movements and states, we forgo the opportunity to use the lens of media technologies. In other words, we forgo the opportunity to understand political change through theories of media change.

This chapter draws on such theories to consider how changes in media technologies precipitate political change. It does so by focusing on an important part of digital Indonesia as we know it today: the mobile phone. The vernacular term for a mobile phone in Indonesia is ‘HP’— short for ‘hand phone’. In this chapter I discuss both the historical roots and the social and political implications of the rapid uptake of mobile phones in Indonesia over the last few years.

This chapter reviews both government and community efforts to provide better internet access to Indonesia's rural areas and villages. Increasing internet penetration, and narrowing the digital divide, has considerable potential to increase economic growth in Indonesia. In low- and middle-income countries, it has been estimated that each 10 per cent increase in high-speed broadband penetration delivers a 1.38 per cent increase in per capita GDP growth (World Bank 2009: 45; ITU 2012: 5). The availability of internet access in rural areas has been identified as a key factor in development (Puskakom UI 2015: 2).

The majority of internet users in Indonesia live in the western region of the country, especially Java, where internet penetration has reached 36.9 per cent of the population (Puskakom UI 2015: 8). About 83 per cent of internet users live in urban areas, but even within Indonesia's largest cities there is a digital divide between those who have regular access to the internet (less than 20 per cent of urban dwellers) and those who do not (over 80 per cent). Indonesia is a ‘mobile-first’ country, with almost 85 per cent of current internet users accessing the internet on a mobile device (Puskakom UI 2015: 24). The best cellular access is in the cities and the worst in rural areas and villages; providing wireless mobile phone coverage in rural areas is difficult because of the necessity to design systems that can overcome physical obstacles such as mountainous terrain. Given that 46.7 per cent of Indonesians live in rural areas (BPS 2014a), increasing the country's internet penetration will require a greater focus on rural villages. However, building expensive infrastructure for small populations in isolated areas is not economically feasible from a commercial operator's point of view.

The Indonesian mobile market has exploded over the past half-decade. In a country with a population of 250 million, cellular subscriptions stand at 326.3 million, meaning that many people own more than one mobile phone. We Are Social claims that 85 per cent of Indonesians own a mobile phone and 43 per cent own a smartphone (Balea 2016). The internet is largely operated by the private sector, and does not rely on significant funds from government budgets. There are more than 300 commercial internet service providers (ISPs) in Indonesia.

Indonesians have welcomed the emergence of new information and com-munication technologies such as the internet and social media platforms. Although internet use remains lower in Indonesia than in the advanced economies, the use of social media platforms has increased significantly. Scholars and observers of social media in Indonesia have pointed out that these platforms have had a positive impact on civil society activism, in particular by widening the civic space that facilitates citizens’ freedom of expression. Nugroho (2011), for example, examined ‘the patterns and processes of collaboration of civil society groups in Indonesia in promoting participatory democracy and freedom of information using new social media and ICTs’ (p. 8), and concluded that ‘the use of the Internet and social media in Indonesian civil society has brought significant implications not only to the organisation's internal managerial performance but more importantly to the external aspects of their work, particularly the dynamics of civic activism and socio-political engagement in the country’ (p. 84).

Social media activism has become more prominent over the last few years due in no small part to the famous Prita Mulyasari case, in which a housewife was arrested for making critical comments in an email about her treatment at a private hospital (see Chapter 8 by Postill and Saputro). Based on an analysis of the types of social media campaigns that have attracted the most public support, Lim (2013: 636) suggests that ‘social media activism is more likely to successfully mobilise mass support when its narratives are simple, associated with low risk actions and congruent with dominant meta-narratives, such as nationalism and religiosity’. Focusing on citizens’ participation in the 2012 gubernatorial election in Jakarta, Priyono et al. (2014) argue that social media has become a powerful tool for civic engagement, by which citizens impart information, express opinions, participate in the political process and influence the agenda of the elected government in Jakarta. Tapsell (2014: 217) contends that, despite the big media companies still having the largest social media followings in Indonesia, ‘the emancipatory ability of social media to highlight a significant issue […] is a greater indicator of the power of social media to overcome mainstream media conglomerates’. Gazali (2014: 437) speculates that ‘Should activists keep working […] in the unique realms of social media, Indonesia may keep moving […] towards a so-called “social media democracy”’.

The digital economy has multifaceted, sweeping yet wildly unpredictable effects on society (Eisenmann 2016). In addition to its economic impact, digitalisation can have cascading and transformative impacts on environment, education, health and governance. The digital economy can be defined as ‘the economic activity that results from billions of everyday online connections among people, businesses, devices, data, and processes’; the smooth functioning of the digital economy depends on hyperconnectivity, referring to the ‘growing interconnectedness of people, organisations, and machines that results from the Internet, mobile technology and the internet of things’ (Deloitte n.d.). Inextricably inter-twined with any definition of the digital economy is the notion of the sharing economy, that is, the use of the internet to facilitate peer-to-peer, rather than firm-centred, commercial exchanges (Belk 2014; Hamari, Sjöklint and Ukkonen 2015; Sundararajan 2016).

The introduction of new technologies has affected economies and societies many times during the course of human history. What is different about digitalisation is the unprecedented speed of the changes in digital technologies and their widespread impact. To be as well prepared as they can be, countries like Indonesia need to understand what the digital economy is and what the impacts are likely to be. This can help them make informed policy and business decisions that prepare the way for the adoption of technological innovations while safeguarding against the risks.

This chapter discusses the potential for the digital economy to generate ‘creative destruction’. First coined by Schumpeter (1934, 1950), this term describes how innovations can revolutionise economic structures by increasing productivity and efficiency, but in the process destroy traditional industries and business models. Creative destruction can be disruptive but it is considered an essential part of economic growth.

First, we provide a conceptual framework for the digital economy and look at how digitalisation fundamentally affects economic activity by reducing market frictions and inefficiencies in ways that are not available in the non-digital environment. Second, we review the available data to identify trends in the digital economy in Indonesia. Third, we provide some preliminary estimates of the impact of the digital economy on the overall economy and on productivity, efficiency, inclusiveness and innovation. We also provide examples of how business models are changing, including some that highlight the potential of the digital economy to promote inclusion.