"The cost for a fixed-broadband basket with monthly data usage of (a minimum of) 5 GB stands at 2.30 percent of GNI per capita, which is also beyond the affordability threshold of 2 percent," reads the World Bank report.
In addition, handset market prices are expensive with Nepal ranking 115th out of 134 countries in terms of device affordability. The high price of devices, especially smartphones, high customs tariffs, and lack of digital literacy has contributed to these digital access gaps, according to the report. With limited players in the market, the development of the broadband market in Nepal has also been curtailed as there is limited competitive pressure on the market to drive investment and innovation. While Nepal has six national mobile network operators, the lion’s share of the market (94.5 percent) is held by just two operators, namely Nepal Telecom and Ncell, which has effectively created a duopoly in the domestic telecommunications market. Despite having a larger number of players in the internet service providers (ISP) business, internet service is primarily concentrated in urban areas. "This is due to the potential of better returns in urban areas and also due to persistent barriers to market entry," reads the report. According to the World Bank, the limited infrastructure sharing and coordination between telecom network providers and other linear infrastructure providers have discouraged new players from entering the market. The report points out that the limited reach of middle-mile fiber networks affects the quality and affordability of services, especially internet services. As a landlocked country, Nepal faces some additional costs in connecting to global telecommunications networks; prices of wholesale data services are much higher than in neighboring countries. According to the report, the absence of cable landing stations on the northeast coast of India is particularly challenging for Nepal and Bhutan, as the international bandwidth they procure needs to be routed over 2200 km to the border. "Improving the capacity and quality of key fixed network transmission routes within India that transport this bandwidth, in addition to expanding access to international connectivity via Bangladesh, can improve access to greater international capacity for Nepal and Bhutan," states the report. The lack of a national payment switch in Nepal has forced banks and financial institutions (BFIs) to pay a hefty price for digital transactions through international payment gateways. Nepal is still in the process of developing a National Payment Switch, which would make payment systems interoperable. Experts say Nepal needs to develop a national payment switch as early as possible. "Establishing the national payment switch is crucial," said Sanjib Subba, CEO of Nepal Electronic Payment System (NEPS), adding, "Once established, we can have our own domestic card like India's RuPay." Currently, the Nepal Clearing House Limited (NCHL) is working on establishing and operating the national payment switch. NCHL has divided the payment switch project into two phases. The first phase will enhance the Retail Payment Switch for enabling non-card-based transaction interoperability through the enhancement of the existing National Payment Interface (NPI) and connectIPS Retail payment switch for routing and settlement of transactions along with establishing a QR scheme. In the second phase, NCHL plans to implement interoperability of card-based transactions through the rollout of the Interoperable Card Switch and Domestic Card Scheme for Nepal. Despite the proliferation of digital businesses, especially new technology startups focusing on areas like education, fintech, and e-commerce, Nepal scores lower than India, Pakistan, Sri Lanka, and marginally higher than Bangladesh, in the Digital Entrepreneurship Index. According to the report, the growth of digital start-ups is expected to accelerate in the next five years. Nepal’s e-commerce sector is valued at close to US$30 million and is experiencing a growth of more than 40 percent per year. "Even so, e-commerce is still nascent, with limited retail infrastructure to support digitization and few digital payment options," says the report. The lack of a large digitally skilled workforce, difficulty in establishing operations, and issues relating to remittances and international payments have created barriers to the entry of large multinational digital firms in Nepal. The report states
- The gaps in access to affordable broadband have limited the ability of many people and businesses to use digital technologies.
- The higher broadband prices, poor as well as unreliable coverage, and higher mobile handset prices have hindered broadband usage.
- The entry-level mobile broadband package is about 2.75 percent of GNI per capita, which is higher than the 2 percent threshold for affordability.
- Nepal is ranked 115th out of 134 countries in terms of device affordability.
- The lack of a national payment switch in Nepal has forced banks and financial institutions (BFIs) to pay a hefty price for digital transactions through international payment gateways.
- Nepal scores lower than India, Pakistan, Sri Lanka, and marginally higher than Bangladesh in the Digital Entrepreneurship Index.
- The lack of a large digitally skilled workforce, difficulty in establishing operations, and issues relating to remittances and international payments have created barriers to the entry of large multi-national digital firms in Nepal.
