Nepali companies and the government have made considerable progress over the past decade to improve internet connectivity. Telecommunication services grew over the pandemic and the government, through the Rural Telecom Development Fund (RTDF), began investing to expand coverage to households and institutions such as government offices, schools, and hospitals. Households subscribing to fixed broadband increased from 7 percent in 2018 to 33 percent by the end of 2021; almost 90 percent of those were fiber optic connections. According to the 2021 census data, 73 percent of households have a phone, 38 percent have internet access, and 15 percent have a computer or a laptop. At the same time, differences in telecom coverage and device ownership between urban and rural areas are stark; women and other vulnerable members in households typically have less access to a phone, leave alone the internet. Nepal is yet to meet its goal of 90 percent broadband penetration.
Infrastructure sharing is one area that can improve coverage and quality of broadband networks, while maximizing citizen welfare. In the same way, the Nepal Telecommunication Authority (NTA), Nepal’s telecommunications regulatory authority, has introduced and set interconnection charge and protocol among wireless voice operators and enabled voice interoperability, similar regulations are now vital. Rather than engaging in costly tower building, regulations can encourage wireless operators to lease and share tower infrastructure with each other. They can then improve the coverage and quality quickly and cheaply. If fixed broadband players share their infrastructure, they can collectively invest in high-speed fiber optic networks in more areas of the country. A new telecommunications act may open pathways to enabling these new models, while also mobilizing private investment. With the guiding principle of consumer welfare, this can have a massive impact on accelerating high-quality internet coverage. Affordability When it comes to entry-level data plans, Nepali telecommunication and internet services are within the affordability standards of the UN Broadband Commission at 5 percent of average monthly income (GNI per capita). The commission has introduced 2025 targets for entry level plans (at least 1GB) to be less than 2 percent of monthly GNI per capita. According to the Alliance for Affordable Internet, Nepal is within the affordability threshold for fixed and wireless broadband, but the country can do better. If operational issues and costs hampering the sector are reduced, savings could be passed directly to end-consumers. However, mobile broadband data costs are relatively higher per unit in comparison to fixed broadband. If Nepal is to achieve wireless data affordability targets, we need to incentivize more competition and investment into the wireless telecom sector. Importantly, the government must accept that telecommunications infrastructure, unlike large projects in energy, require regular investment and upgrade because of the advancements in the underlying technologies that enable the network. Policy reforms related to local ownership requirements and licensing fees must reflect goals to expand competition and encourage foreign direct investment (FDI) to help improve the country’s wireless network, service quality, and next-generation capabilities. These upgrades will help Nepal to hit the UN Broadband Commission’s 2025 goals. In fixed broadband, on the other hand, data costs have been driven lower because Internet Service Providers (ISPs) have been able to piggyback off affordable equipment and the Nepal Electricity Authority’s (NEA) established electricity distribution infrastructure. However, investments have been overlapping. Industry players point out that existing fixed-broadband service coverage in Nepal could have been achieved with half or even quarter of the current accumulated aggregate level of capital expenditure. Again, savings made through sharing of infrastructure could be passed to consumers. Two other features of Nepal’s internet sectors are the relatively high international internet costs because of insufficient collective bargaining from our service providers, as well as excessively high government taxes on internet service providers. Both are contributing to creating a sector that may be characterized with low financial viability and little incentive for innovation. Value-added services (VAS) While the overarching investment focus of the government is currently on hardware infrastructure and connectivity, value-added services can further advance the goal of internet coverage. I am referring less to the legal definition of VAS under the telecommunications act, a category under which most ISPs fall into, but in general to services that can complement internet and voice telecom services. VAS are enhanced or improved services provided over telecommunication networks other than core network services. These are services from content providers, network aggregators, application providers, etc. In Nepal (rural areas and urban peripheries in particular), there is a need for services that contribute toward socio-economic development. With greater internet access, more people have signed on to social media and now have better access to information. By producing and monetizing online digital content, many Nepalis have also started doing well in the Creator Economy. However, connectivity goals must also focus on enhancing financial literacy and cybersecurity, better health and educational outcomes, and more opportunities for entrepreneurship. Rural broadband programs currently under execution in Nepal provide free physical broadband connections and free internet access; they are great starter programs to digitally connect more of the population. But Nepal needs internet access to improve tangible socio-economic indicators and contribute to economic prosperity. It is remarkable that the average 35-year-old woman in Nepal's mid-hills can go online and use Facebook, TikTok, and YouTube today. However, she and her family should also be able to use digital financial services, tele-health services, online education for the children, and improve marketability of whatever the family produces. Conclusion In the past few years, significant effort in Nepal has gone toward improving access to internet connectivity. This is a welcome effort, and one that needs to continue. Policymakers and regulators exploring reforms to the telecom sector and other sectors focused on service-delivery must place consumer welfare as the guiding principle for these reforms. Such focus can make regulations more dynamic and forward-looking, especially for industries prone to disruption. The author, a Senior Fellow with the Nepal Economic Forum, leads Digital Chautari, a platform to facilitate conversations on creating a Digital Nepal
