Fiscal Interview

‘Nepal Telecom, Ncell are indirectly impelling a third player to consider the Nepali market’

The domestic telecommunication industry definitely played a crucial role during the difficult situation created by the COVID-19 pandemic. Be it ensuring uninterrupted connectivity or making the public aware about the coronavirus or helping the government tackle the crisis, the telecom firms and internet service providers were at the forefront. And helping all these happen was the regulatory body Nepal Telecommunications Authority. However, there are few issues related to the quality of telecom and internet services which has been a subject of criticism from the public. Umesh Poudel of Fiscal Nepal talked to Purushottam Khanal, chairman of NTA, to get a grasp on the role played by the industry during the crisis and other prevailing issues.

What is your assessment on the impact of COVID-19 on Nepal’s telecom industry?

Due to the coronavirus and its resulting consequences, domestic telecom companies have been operating their business at a significant loss. The telecom companies and internet service providers (ISPs) have witnessed a notable decline in their profits as compared to what they used to earn during normal times.

After the government imposed a nationwide lockdown, the use of data increased significantly as the public was more engaged in high-resolution videos, games and applications like TikTok. Apparently, voice market has slowed. However, the telecom firms and ISPs have been providing quality services even during such difficult times.

In which direction do you think will the country’s telecom industry head towards after the pandemic is contained and the situation normalizes?

In terms of new technologies like 5G and 4G, telecom operators are yet to sufficiently expand their infrastructure across the country. If they rapidly expand their 4G networks, they will be able to generate revenue since new markets like online shopping, e-learning, e-classes, healthcare system and telemedicine, among others, which consume high volume of data, are gradually emerging.

I believe that the telecom firms will be able to revive their business at a faster pace and they will recover their profits in the near future. Lately, telecom firms are also targeting their services towards different other sectors including small and medium enterprises (SMEs). Thus, I am pretty sure that telecom firms will find various ways to recover their profits and will overcome the grave situation created by the pandemic.

NTA has often accused telecom companies and ISPs of ignoring its instructions. Is it due to the weak regulatory system?

During the lockdown, telecom companies provided 25 percent discount to their subscribers on various services. However, it is true that ISPs did not offer any discounts and they did communicate with us about it. The ISPs stated that they could not provide any discounts as they were facing losses during the pandemic due to the massive demand for internet bandwidth.

The ISPs said that they had not purchased additional bandwidth and if they did give discounts then the number of users would have surged exponentially and the entire internet system could have collapsed. However, the ISPs have not been able to back their claims with proper facts as so why internet speed has become slow and why they were not able to provide discounts. But let me make it clear that NTA did not direct any telecom firm or ISP to offer 25 percent discount during the lockdown. We had only requested them to provide such facility to customers.

Only two telecom firms have been ruling the domestic telecom market while the quality of services being provided is often questioned by customers. What is your view on the need of a third big player in Nepal’s telecommunication sector?

Obviously, it is high time that a new big telecom firm forays into the Nepali market. Nepal Telecom and Ncell have consistently refused to share their infrastructure or drop tariff, which basically means they are indirectly impelling a third player to consider the Nepali market. Earlier, we had assigned an internationally recognized company to conduct a study on the roadmap of the domestic frequency.

The company has submitted its report to NTA which mentions that. When I took up my responsibility at NTA, I had forwarded a message to all the telecom companies to either provide better services or go for merger as per the prevalent law.

Moreover, I also decided to scrap the license of those Nepal needs a third big telecom player firms that had not been operating properly and had not paid their due taxes. However, on the pretext of protecting domestic companies the government revoked NTA’s decision and added more time for those firms to clear their taxes.

Now I am planning to draft a new policy on mergers and acquisitions between telecom firms with an incentive package to those who enter into this process. NTA is planning to provide additional frequency to those telecom entities, especially small firms that merge. We will provide a timeline for them to merge and this will be the last option now. If they fail to merge we will scrap their license.

Nepal’s telecom market needs a new telecom company as the general consumers have been deprived of taking additional advantages from the operators. At present, the telecom operators are enjoying a sort of monopoly as the price capping mechanism has implemented.

In such a situation they request us to hike the price while implementing any plan and we are not in a position to tell them to reduce their existing tariff as the law bars us from doing so. So, once the new law is enacted then companies that cannot function properly or refuse to merge will be immediately taken over by the government.

For instance, the government has given a final timeline to Smart Telecom to manage their operation system as per law and pay existing dues by March 13 of next year. If Smart Telecom is unable to do so then we will take over Smart Telecom and auction their frequency.

Is there any possibility of increasing the frequency fee of telecom companies?

If you look at the telecom industry in South Asia you will notice that the taxes are pretty high. We can take Smart Telecom as an example of a company that has not been able to expand as required due to the high investment needed. If any firm wants to adopt new technology it needs to further invest and the government is not going to provide any funds.

For instance, Nepal Telecom paid around Rs 20 billion to start and operate 4G service in the country. At a time when the telecom companies have not been able to pay their regular frequency fees, if we increase the fee amount they will not be able to sustain themselves. We are trying to change the existing license policy and frequency modality as the previous management provided frequency without proper study.

After formulating the law, we will apply the international standard for granting license and for frequency distribution. In this manner, telecom firms will also provide better service and the government will also get proper license and frequency fee from them.

What is the status of RTDF projects? There have been complaints that beneficiaries have not been able to avail internet service from such projects. What do you have to say on this matter?

The progress of Rural Telecommunication Development Fund (RTDF) projects has been satisfactory and the targeted people are deriving benefits from the projects. We have provided free internet service to community schools, local levels, hospitals and local communities for two years.

However, they are seeking the free service for a longer period of time which is not possible. We actually have the mandate to only develop necessary infrastructure in such areas and we have almost completed the projects. Schools have started lobbying with related ministries and other high-level authorities for free internet service. Even hospitals are doing so. They need to ask their respective local level governments to separate a budget for the purpose.

We only have the responsibility of providing infrastructure and very limited bandwidth. If anyone lacks internet infrastructure, we will immediately provide it. I have suggested the concerned parties to allocate a budget for internet service. For example, the schools are conducting online classes now and not operating their vehicles.

So, the cost saved from the vehicles can be diverted to strengthening their internet services. If the government instructs us to provide free internet to all the aforesaid areas we will do so but as per the present law, we don’t have any jurisdiction to provide additional internet to them.

Projects are often delayed in Nepal due to various hassles. How have your overcome the obstacles that you faced while implementing the RTDF-funded projects?

There are many reasons why projects often get delayed. However, the main challenge is that there is no inter-governmental coordination mechanism that could facilitate different government entities to execute their projects on time.

For example, the Department of Roads is preparing to call a tender this month and Nepal Electricity Authority is all set to roll out a tender six months after the road project starts. If there was coordination between the authorities then the tenders could have been called simultaneously. In this way more things could be managed in a proper way and the work of one authority wouldn’t hamper the work of another.

I think the government should introduce an act to address this issue if we want projects to be completed on schedule.

Meanwhile, we have been able to achieve over 75 percent broadband internet penetration. As I mentioned earlier due to lack of inter-governmental coordination, we have not able to expand fiber net the way we had planned.

I also feel that the Public Procurement Monitoring Office is the expert of any procurement case in Nepal. The office needs to be more proactive and facilitate all government agencies like how the government does for the foreign donor agencies.

Consumers often complain that the telecom and internet services in the country are not reliable. What has NTA been doing in this regard?

There are two things that directly hit the reliability of telecom services. The first is that if the government does not provide sufficient spectrum to the operators then how are they going to deliver quality service? So, concerned stakeholders need to hold discussions regarding this issue. It wouldn’t be wise to blame the individual companies when they are not getting sufficient spectrum.

The second factor affecting reliability these days is that after the massive earthquake in 2015 many house owners have stopped allowing telecom operators to install towers on their rooftops.

So, when towers cannot be erected in various vantage points service will definitely be affected. I think the government should come up with a policy which states that if necessary then house owners should provide the facility of erecting telecom towers on their rooftops.

Another aspect that could be affecting service is that Nepal Telecom, Ncell and Smart Telecom are at the moment expanding their 4G services. After they complete the expansion process, the issue will settle down automatically. The other cause is the country’s difficult topography due to which electricity can be accessed in remote and high-altitude areas.

Recently, telecom companies have also started seeking license to deliver digital payment services like banks but have not been granted one. What is your view on this issue?

We have held discussions with the governor of Nepal Rastra Bank to provide mobile banking license to telecom companies but we have not reached any conclusion yet. In the developed nations telecom firms have received license to manage mobile payments. But in Nepal the banks and financial institutions are apprehensive that if telecom firms are given the license then the market for digital payments will be captured by the telecom firms.

There is no synergy in between the banking sector and telecom companies. If we want to see substantial changes in the digital payment system in the country then it is necessary for telecom firms to enter the sector.

The telecom companies have world-class technology and infrastructure so banks should collaborate with them to enhance the country’s digital payment system.

If telecom companies are permitted to operate digital payment service then maybe we can replace bank branches and have a system of ‘one mobile, one bank account’ and many other developments.

Umesh Poudel |
Wednesday October 7, 2020, 12:19:05 PM |

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