HE EPAL ASE TUDY - itu.int

THE INTERNET FROM THE TOP OF THE WORLD:NEPAL CASE STUDY

November 2000

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This report was drafted by Sy Goodman, Tim Kelly, Michael Minges andLarry Press. Lakshmi Rajagopal contributed to the country overviewchapter. Vanessa Gray provided comments. The cover of the report wasdesigned by Dalia Mendiluce. The layout, formatting and production of thereport was carried out by Nathalie Delmas. The report is based on fieldresearch conducted during 17-21 January 2000 and electroniccorrespondence as well as reports and articles. The authors are indebtedto Amrit R. Pant, Shashank Kansal and numerous other people whoprovided input to the report and the time they spared for our manyquestions (for a list of people and organizations met during the fieldresearch see Annex 1). The opinions expressed in the report are those ofthe authors and may not necessarily reflect the views of the InternationalTelecommunication Union or its members or the Kingdom of Nepal. Moredetails can be found on the website at http://www.itu.int/ti/casestudies.

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Contents

1. Country background ...............................................................1

1.1 Overview ............................................................................ 1

1.2 Demography ....................................................................... 11.3 Economy ............................................................................ 2

1.4 Human development ........................................................... 3

1.5 Political ............................................................................... 3

2. Information and communication technology status ..................5

2.1 Telecommunication sector .................................................... 5

2.2 Information Technology sector ........................................... 13

2.3 Mass media ...................................................................... 16

3. Internet and telecommunications ..........................................20

3.1 Role of incumbent telecommunication operator in Internet ... 203.2 Pricing structure for Internet services ................................. 20

3.3 Regulatory status of Internet ............................................. 21

4. National absorption of Information Technology .....................254.1 Government ...................................................................... 25

4.2 Business .......................................................................... 28

4.3 E-commerce ...................................................................... 30

4.4 Education ......................................................................... 364.5 Health .............................................................................. 39

5. Summary and recommendations ...........................................43

5.1 State of the Internet in Nepal ............................................ 435.2 Recommendations ............................................................. 45

Annex 1: Organizations met ......................................................48

Annex 2: Framework dimensions ..............................................49

Acronyms and abbreviations .....................................................53

Figures

1 Nepal .................................................................................. 1

2.1 Fixed-line networks .............................................................. 6

2.2 Teledensity by district ........................................................... 62.3 Sources of revenue ............................................................ 10

2.4 Nepal's international telephone traffic ................................... 11

2.5 Internet users in Nepal ....................................................... 15

3.1 Nepal's domain name ......................................................... 225.1 State of the Internet in Nepal .............................................. 43

Tables

1.1 Population indicators ........................................................... 2

1.2 Nepal Macroeconomic indicators ........................................... 3

1.3 Human poverty indicators .................................................... 4

2.1 Telecommunication licences granted by NTA ........................... 82.2 Major telecommunication indicators for Nepal ...................... 12

2.3 Imports of computers and parts ......................................... 14

2.4 ISPs in Nepal .................................................................... 15

2.5 International Internet Capacity .......................................... 162.6 Literacy, as percentage of population which is

six years and older ..................................................... 17

2.7 Regional distribution of newspapers ................................... 18

2.8 Broadcasting indicators ..................................................... 18

3.1 Internet dial-up tariffs in South Asian countries ................... 214.1 Comparison of printed and online version of Nepal Directory 31

4.2 Schools in Nepal, 1996 ...................................................... 37

4.3 Schools with websites, January 2000.................................. 38

4.4 Selected regional health indicators ..................................... 404.5 Nepalese health resources ................................................ 41

5.1 State of the Internet in Nepal and neighbouring countries ... 44

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1

1. Country background

Administratively, Nepal is divided intofive development regions and 75 dis-tricts. The lowest administrative divi-sion is the Village DevelopmentCommittee (VDC) of which thereare 3’996.

1.2 Demography

The last census carried out in Nepaltook place in 1991 when the numberof inhabitants living in the country wasestimated at 18.5 million (see Ta-

ble 1.1). More re-cent estimatesdiffer depending onthe source. For ex-ample, 1996 esti-mates include:22 million (WorldBank), 20.8 million(Nepal Central Bu-reau of Statistics)and 21.1 million(UN). The popula-tion of Nepal isaround the sameas Malaysia andVenezuela. Popula-tion growth is high,between 2.4 –2.7 per cent a year.

The number of people living inKathmandu, the capital, was estimatedat over 900’000 in 1998, accountingfor 4.4 per cent of the country total.Only half a dozen other cities in thecountry have a population over 10’000.Some 91 per cent of the inhabitants ofNepal reside in rural areas. Half thepopulation is between the ages of 15and 59, with a further 42 per cent be-low the age of 15. Less than 6 per centof the population is above 60 years ofage.

Nepal is a Hindu kingdom - the onlyofficially Hindu country in the world.Over 85 per cent of its population isHindu. The rest is comprised of Bud-dhists (the country claims to be the

1.1 Overview

The Kingdom of Nepal is situated inSouth Asia, on the Southern slopes ofthe Himalaya mountain range, whichseparates tropical India from the semi-arid central Asian plateau. Nepal is anelongated, rectangular country, with anarea of approximately 147’181 squarekilometres—about the same as Greeceor Bangladesh. Geopolitically, the na-tion lies between India and China, andis landlocked.

The country does not ascend gradu-ally, but rises in several chains of hillsthat lie in an East-West orientation, fi-nally terminating in the Himalayas.Beyond the Himalayas is the 5’000 me-tre high Tibetan plateau. Within thissmall area, fall many climactic zones -tropical jungles in the Terai plains, Arc-tic desert in the high regions, and aridzones in the Tibetan plateau. Nepalconsists of three geographic regions:the low-lying Terai region (17 per centof the total land area), the Mountainregion (64 per cent) and the Himalayanregion (19 per cent). Eight of theworld’s ten tallest peaks, including thehighest Mt. Everest, are located inNepal.


Figure 1: Nepal

Source: The World Factbook.

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Nepal Case Study

birthplace of Buddha), Muslims andothers. Nepali is the official language(spoken by about half the population;more than a dozen other languages arealso used). English is widely under-stood in tourist areas.

1.3 Economy

Nepal’s 1997 Gross National Product(GNP) of US$ 4.8 billion, is, on a percapita basis US$ 210, statistically mak-ing the nation one of the poorest coun-tries in the world. Indeed the kingdomis classified by the UNDP as a LeastDeveloped Country (LDC), with nearlyhalf its population living below the pov-erty line. However GNP expressed inpurchasing power parity (PPP), whichadjusts GNP according to the price levelin the country, was US$ 1’090 in 1997,placing it at the high end among theLDCs.

The economy grew at five per cent ayear between 1990 – 97. Agricultureis the mainstay of the economy, andoccupies 80 per cent of the popula-tion, accounting for 41 per cent of theGDP. Services make up 35 per cent,industry 22 per cent and manufactur-ing 10 per cent. Industrial activitymainly comprises of the processing ofagricultural products. Foreign ex-

Table 1.1: Population indicators

Year & Item

Total Population

Male

Female

Total Households

Average Household Size

Literacy Rate of 6 Years and above

Population Density Per sq. km.

1981 Census

15,022,839

7,695,336

7,327,503

2,585,154

5.8

23.3

102.1

1991 Census

18,491,097

9,220,974

9,270,123

3,328,721

5.6

39.6

123

1998 Projection

21,349,345

10,641,286

10,708,059

3,845,056

5.6

46

142

Age Distribution:

Below 15 yrs

15-59 yrs

Above 60 yrs

Urban Population:

42.4%

51.5%

5.8%

9%

Source: UNDP Nepal. <http://www.undp.org.np/keydoc/nprofile/demography.htm>

change over the last couple of yearswas mainly earned through textiles andcarpet making.

The country imports almost four timesmore than it exports. The main importsare petroleum, transport equipmentand fertilizer. Major exports includecarpets, garments and leather. Tour-ism provides around 20 per cent ofNepal’s export earnings. As an LDC,Nepal benefits from significant bi-lat-eral and multilateral assistance, ac-counting for almost nine per cent ofits GDP.

Since 1991, the government has triedto push through economic reform, andencourage trade and foreign invest-ment. Political instability, however, in-cluding the fall of five governmentsover the past few years, coupled withthe small size of the economy, the re-moteness of its location, and vulner-ability to natural disasters, poses greatchallenges for development.

Nepal is a landlocked country with twogiant neighbours. Nepal mainly countson India for sea access, and its rela-tion with India is thereby crucial. A dis-pute between the two in the 1980s,for example, led India to revoke theTrade and Transit Treaty with Nepal,

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Table 1.2: Nepal Macroeconomic indicators

Gross National Product: $4.8 billion (1997)

GNP Per Capita: $210 (1997)

GNP Measured at PPP: $1090 (1997)

GDP Growth Rate: 5% (1990-97 average)

Structure of Economy: Sector % of GDP Growth RateAgriculture 43 2.2%Industry 22 7.7%Manufacturing 10 6.6%Services 35

International Trade:

Exports US$ 400 mil.

Imports US$ 1’653 mil.

Current Account Balance US$ 569 mil.

Trade Deficit as % of GDP 25.3%

Major Exports Major Imports1. Woollen Carpets 1. Petroleum Products2. Ready-made Garments 2. Transport Equipment & Parts3. Leather 3. Chemical Fertilizer4. Pulses 4. Raw Wool5. Raw Jute and Jute Goods 5. Cotton thread

Foreign Direct Investment: $19 million (1996)

External Debt: (26% of GNP) $2’413 million

Official Development Assistance (ODA): 8.9% of GNP

Gross Domestic Investment: 22% (of GNP)

Gross Domestic Saving: 8% (1997)

Inflation Rate: 8.3% (1990-97 average)

Source: Nepal - An Economic Handbook, Economic Relations and Coordination Division,Ministry of Foreign Affairs, June 1999. <http://www.undp.org.np/keydoc/nprofile/macro_econm.htm>

which caused it much hardship. India isalso a major donor to Nepal, with pref-erential trade treatment given to it.2

1.4 Human development

Nepal ranked 144th out of 174 coun-tries in the UNDP’s 1999 Human De-velopment Index. Indicators of humandevelopment for the country are shownin the UNDP report on the country at<http://www.undp.org.np/keydoc/nprofile/humandev.htm>. Although ithas made major progress, Nepal rankslow in a number of indicators comparedto countries in the South Asian region.The UNDP Human Poverty Index (HPI)

is a function of the percentage of peo-ple expected to die before age 40, ofadults who are illiterate, of populationswithout access to health services, ofpopulations without access to safe wa-ter, and of children under five who areunder-weight. As seen in table 1.3,Nepal trails nations in the region (Bhu-tan was not covered in the report).

1.5 Political

The Nepalese government became aparliamentary democracy under a con-stitutional monarchy in May 19911 ,and enjoys universal suffrage. Nepalwas ruled by the House of Gorkha for


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Nepal Case Study

Table 1.3: Human povertyindicators

Nation HPI

China 19

Sri Lanka 20

India 36

Pakistan 42

Bangladesh 44

Nepal 52

Source: UNDP Human Poverty Index,www.undp.org/povertyreport.

1 <http://tradeport.org/ts/countries/nepal/political.html> (February 8, 2000)Nepal: Political Environment

2 <http://tradeport.org/countries/nepal/political.html> (February 8, 2000)Source: UN Department of Commerce – National Trade Data Bank, September 3, 1999.

3 <http://lcweb2.loc.gov/cig-bin/query2/>4 <wysiwyg://32/http://www.nepalhomepage.com/general/political-structure.html> (February 8, 2000)

nearly three centuries before it cameinto conflict with the British East IndiaCompany in the 19th century. The re-sulting Anglo-Nepalese war devastatedNepal, reducing it to its present size,and this was followed by three dec-ades of aristocratic factious infighting.Rulership by the hereditary Rana rulebegan in 1846, and gave way, in 1951,to a return of the original monarchy ofthe Kingdom, which took charge of all

executive powers and the armedforces.

In 1962, King Bir Bikram Shah Dev setup a centrally controlled partylesscouncil system of government calledthe Panchayat. Increasing oppositionand disillusionment with this systemled to the pro-democracy movement.

The Movement for the Restoration ofDemocracy was formally established inNepal in 1990. Political unrest, agita-tion, demonstrations and rallies led tothe replacement of the Panchayat sys-tem with a multi-party interim govern-ment in 1990. General elections wereheld in 1991, with 65% of the popu-lace voting.3

King Birendra is presently head ofstate, and commander-in-chief, whilethe prime minister heads a council ofministers appointed from the electedHouse of Representatives. The Su-preme Court acts as court of appeal,and has powers of original jurisdiction.Elections in 1999 saw the Nepali Con-gress win an absolute majority of seatsin parliament, and Krishna PrasadBhattarai sworn in as Prime Minister.4

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2. Information and communication technology status


2.1 Telecommunicationsector

2.1.1 History and current status

The history of telecommunications inNepal is relatively recent. A line be-tween Kathmandu and the Indian bor-der was opened in 1914, but it wasnot until 1955 that the capacity of thelocal exchange in Kathmandu reached300 lines. Telex service opened in 1972and the first satellite earth station wasinstalled in 1982. Prior to that mostinternational traffic, as well as muchof the domestic long-distance traffic,was conducted by short-wave radio.

The modernisation of Nepal’s telecom-munications dates back to the FirstTelecommunication Project, com-menced in 1970. At that time, thecountry had a total line capacity of5’350 lines, split between three ex-changes. By the end of the first FiveYear Plan, in 1975, there were some7’100 lines and ten years later this hadincreased to 20’691. Thereafter, thepace of growth began to accelerate,reaching 82’774 lines by 1995.

But the major growth has occurredsince 1995. The number of telephonemain lines in use in Nepal, in mid-No-vember 1999 was 234’668 comparedwith 191’594 in the same month a yearearlier, a growth rate of 22 per cent.The acceleration in growth rates ismainly due to a World Bank loan, in-troducing transparent internationaltendering, which has increased thenumber of lines that can be purchasedfor the same price by threefold. TheWorld Bank has extended two loansduring the 1990s to Nepal for telecom-munications. The first was approvedin 1992 for the amount ofUS$ 55 million. The second was ap-proved in 2000 for the amount ofUS$ 45 million. In the latter half of the1990s, Nepal has grown as fast, if notfaster, than any other country in the

South Asia region (see Figure 2.1),despite the absence of foreign invest-ment.

An important milestone was reachedin 1999 when teledensity reached oneline per 100 inhabitants. However,there are still more than 260’000 onthe waiting list, implying an averagewaiting time of more than six years(those on the waiting list have paid adeposit of 50 Rs, just under 1US$). Theprice of line connection is 2’000 Rs(around US$29). Around two-thirds ofthe telephones are in the Kathmanduvalley, which accounts for less than3 per cent of the population.Kathmandu itself has a teledensity of18.2 lines per 100 inhabitants com-pared with 1.07 in the country as awhole and 0.06 in rural areas (data formid-November 1999). Figure 2.2shows the level of teledensity in Ne-pal’s 75 districts. Of these districts,5 do not have a local exchange anduse HF radio. Although some of the dis-tricts have an exchange, no lines areconnected. In total, twelve districts arewithout any direct service. The totalpopulation of these districts withoutdirect service is 1.2 million.

2.1.2 Industry structure

2.1.2.1Regulatory structure

Telecommunications in Nepal fall un-der the responsibility of the Ministryof Information and Communications(MoIC) and is regulated under theterms of the 1997 TelecommunicationsAct.5 The Act itself is the outcome of aNational Communications Policy, whichwas initiated in 1992. The Act estab-lished a regulatory body, the NepalTelecommunications Authority (NTA),as an autonomous and corporate body,with a mission of “managing and regu-larising the Telecommunications Serv-ice and making it reliable and easilyavailable to the public”. The chair of

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Nepal Case Study

Figure 2.1: Fixed-line networks

Number of main telephone lines, in Nepal, 1990-98, and comparative growth rates within region, 1993-98

75'637

208'387

57'320

0

50'000

100'000

150'000

200'000

250'000

1990 1992 1994 1996 1998

Main telephone lines installed (Year-end 15/7)

0%

10%

20%

30%

40%

50%

60%

1993 1994 1995 1996 1997 1998

Nepal

India

PakistanBangladesh

Sri Lanka

Main line growth (% per year)

Note: The data for Nepal is for financial year end 15 July. Thus, data shown for 1998 means year ending 15/7/99.Source: ITU World Telecommunication Indicators Database.

Figure 2.2: Teledensity by district

Source: ITU adapted from NTC data.

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the Authority is Mr Bhoop Raj Pandeyand there should be four other mem-bers of the NTA, though to date twopositions remain vacant.

The Nepal Telecommunications Corpo-ration (NTC) is the incumbent publictelecommunications operator and, untilrecently, held a monopoly over all as-pects of telecommunications in theKingdom. The chair of the Board ofDirectors is Mr Shree Ram Poudel, theSecretary of the MoIC. The significanceof this is that it means NTC is not fullyindependent of the government andtherefore the corporatisation process,which was initiated under the NationalCommunications Policy of 1992, hasnot been effectively implemented. Forinstance, according to the terms of theAct, the Minister of Information andCommunications is also chair of theRadio Frequency Policy DeterminationCommittee, which administers and al-locates spectrum. Furthermore, thefact that NTC is still effectively a gov-ernment corporation means that it hasonly limited access to external financ-ing. The lack of a strategic partner,even in the mobile field, has delayedthe introduction of modern manage-ment techniques.

As of mid-November 1999 NTC em-ploys some 4’661 people, implying alabour productivity level of 50 lines peremployee, around 40 per cent of theglobal average. The high potentialgrowth activities, including mobile cel-lular, Internet and business activitiesare grouped into a “Cellular Mobile andNew Services” unit that employs about60 people.

2.1.2.2Privatisation

NTC is fully state-owned though thereare plans to corporatize and privatizethe company. The plans, as outlinedin the Telecommunication Sector Strat-egy document, foresee the introduc-tion of a strategic investor, which wouldtake just over 50 per cent of theshares, with additional shares going tolocal investors. Senior managementwithin NTC is apparently keen to pressahead with privatisation, but there isopposition from the staff union. Fur-thermore, the necessary initial step ofcorporatization has not yet been ef-

fectively carried out. One indication ofthis is the fact that the MoIC still pro-vides the Chairman of the NTC board.

There is a privatisation unit within theMinistry of Finance, which has alreadycarried out around 16 smallerprivatisations, but the telecommuni-cations sector is not considered a pri-ority because it is “profitable”.Incidentally, in the civil aviation field,there are now 17 private domestic air-lines, including Buddha Air, Necon andLumbini Air. These new airlines havesucceeded in increasing domestic airtravel by 400 per cent since the early1990s even though they are compet-ing against the state-owned RoyalNepal, which operates all internationalflights. Experience from this sector,which is regulated by the Tourism Min-istry, shows that private sector par-ticipation can work in Nepal.

2.1.3 Regulation and policy-making

2.1.3.1Licensing

The 1997 Act established a licensingregime, which has been actively pur-sued by the regulator, Mr Pandey, whowas described as a “godsend” by theprivate sector. Areas that were liber-alised in the Act include the InternetService Provider (ISP) market, radio-paging and data communications viaVery-Small Aperture Terminals (VSAT).There is no limitation on the numberof licences that can be issued in theseareas. In addition, the Cable TV mar-ket, which is regulated under the 1991National Broadcasting Act by the MoIC,is also liberalised. Table 2.1 shows alist of licenses granted by mid-Janu-ary 2000. It should be noted that insome areas that are notionally liberal-ised, including payphones and pre-paidcalling service, trunking mobile andlocal data communications, there havebeen no requests for licences to date.

2.1.3.2Market liberalisation

The general policy direction was es-tablished in the 1992 National Com-munications Policy and has morerecently been elaborated in a Telecom-munication Sector Strategy document,prepared for the World Bank in Octo-ber 1998 by Telecon Ltd., a Finnishconsultancy. The document divides the


8

Nepal Case Study

timetable for market liberalisation intothree stages: steps to be taken im-mediately, by the year 2000 and nolater than the year 2004. In practice,there has been slippage on most ofthe targets. The market liberalisingmoves that were intended to be car-ried out “immediately” were enactedonly in September 1999. Furthermore,the licensing of a wireless local loop(WLL) competitor to NTC, which wasdue to be tendered in 1998 and tostart operations by the end of 1999,has still not started. The regulatorhad announced in the press that thetender documents would be availablein December 1999, but they were stillworking on them in January 2000.One delay has arisen because MoICwas slow in allocating frequencies.This delay may have been due to theclose relationship between the min-istry (MoIC) and the operator (NTC).

The most serious delay has been inthe licensing of mobile service. Atender was carried out around threeyears ago. However, the processended up in court and was over-thrown because it was argued thatthe then government had acted un-constitutionally (the period sinceparliamentary democracy was estab-lished in 1991 has been politicallyunstable with frequent changes ofparty, which have politicised the civilservice). NTC started a mobile serv-ice (using GSM 900) during 1999and, as of mid-November 1999, had3’154 sub-scribers. NTC is one of the

few developing country operatorsthat decided to establish a mobile op-erator without assistance from astrategic partner. It does not offerpre-paid service.

The further expansion of mobile andthe introduction of a second opera-tor is likely to be constrained by thenumbering plan, which is still underthe control of the NTC. Furthermore,the tender for the second GSM op-erator, which is expected to be is-sued at the same time as the tenderfor the WLL operator, is not expectedto include an international gateway.Given that NTC currently gainsaround 60 per cent of its revenuefrom international operations, andcharges high prices for internationalcalls, the fact that the second GSMoperator is not able to provide itsown connectivity is likely to have theeffect of reducing the perceived valueof the license.

According to the terms of the Act,licences would normally be issued fora maximum period of 25 years withrenewal after ten. It is likely to bestipulated that there be a minimumof 20 per cent Nepali ownership.However, it is noted in the Act that,where foreign ownership is greaterthan 50 per cent, the land, buildingplant and equipment would revert tostate ownership after the expiry ofthe license period and would haveto be re-purchased by the operatorsat a price set by the regulator.

Table 2.1: Telecommunication licences granted by NTA

Source: NTA.

Service No. of licences Service No. of licences

VSAT provider 4 Internet (with email) 11 (9 operational)

VSAT user 11 Fax-mail 3

Radio-paging 5 Video-conferencing 1

Cellular mobile 1

As at mid-January 2000

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2.1.3.3Tariff rebalancing and inter-connection

Unlike in India where the regulator’sinitiative on tariff rebalancing and in-terconnection has proved so crucialto telecom reform, NTA does not ap-pear to have taken any action on thisissue. Indeed, NTC’s opinion is that,because its charter dates from be-fore NTA was established, it is notregulated for basic services by NTA.It has submitted a tariff increase planto MoIC and the Ministry of Finance,but not to NTA. The plan would seelocal call charges double from 1 Rsto 2 Rs (around 2.8 US cents) for athree minute peak rate call. Monthlysubscription charges, which are cur-rently set at 150 Rs for both busi-ness and residential subscribers,including 100 free 3-minute localcalls, would also double. The tariffrebalancing plan also sees long dis-tance calls rising (with a cut from fivezones to three) and some interna-tional call charges falling, with a re-duction in international call zonesfrom four zones to two.

While tariff rebalancing is necessary,there having been no change for thepast eight years during, which timeinflation has averaged 6-8 per centper year, it is unfortunate that NTAhas not been permitted to make anindependent review. Furthermore,proposals submitted by the ISPs toallow revenue-sharing of the localcall charge (allowing, for instance,the provision of “free Internet”,funded by local call charges) have notbeen acted upon by NTC, nor has con-sideration been given to a lowermonthly subscription for lines, whichdo not make outgoing local calls (e.g.,the lines rented by ISPs). The only areawhere NTC seems responsive to cus-tomers is for international leased linecharges where NTC cut its chargesdrastically after the private ISPs in-stalled their own VSAT links.

As NTC does not compete directly withthe private sector, the question of in-terconnect has not yet arisen, thoughit will obviously become a critical is-sue once the new licenses are issued.NTA does not appear to be intending

to take an active stance, but will ratherleave it to NTC to negotiate with itscompetitors. The experience of theISPs is that the published tariff is ef-fectively the interconnect rate. In theTelecommunication Strategy documentput forward by Telecon Ltd., it is pro-posed that interconnect rates be setat 50 per cent of the published tariff(so, to interconnect to the PSTN wouldcost 50 per cent of the local call tariffand to interconnect to a mobile net-work would cost 50 per cent of the costof a mobile call). Given that local calltariffs have not been revised for years,this arrangement is likely to be highlyasymmetric.

2.1.4 Network

2.1.4.1Backbone network

One advantage of Nepal’s networkbeing relatively young is that it is all-digital with the majority having beeninstalled in the last few years. Thebackbone of the network is a digitalmicrowave link, which runs from Eastto West, offering some 20’000 voicechannels. In addition, there arespurs, which link the major cities anddistricts using Multi Access Rural Tel-ephone System (MARTS) technology.Other areas of the country are servedby short-wave radio or by VSAT, ofwhich there are currently seven inservice. The main international linksare via a fibre optic cable to Indiaand via INTELSAT. There is also adigital microwave link to Bangladesh.In total, there were 854 internationaltelephone circuits in operation atmid-November, up from 804 a yearearlier.

There are plans afoot to create a fibrering around Kathmandu (alreadystarted) and an east-west fibre linkrunning alongside the main highway(tendering for this project is expectedsoon). The Kathmandu ring is beingfinanced from NTC’s own fundswhereas the east-west link may befunded, in part, from Nordic develop-ment funds. In addition to the sevenexisting VSATs, a further five areplanned to make up a regional satel-lite network as a back-up to the ter-restrial network.


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Nepal Case Study

2.1.4.2Rural access

Nepal has around 4’000 Village De-velopment Councils (VDCs). Some1’535 of the VDCs (39 per cent) havetelephone access and the stated goalis to provide every VDC with at leasttwo telephones by the year 2003.This goal is likely to slip to at least2005. The NTA has imposed a 2 percent tax on all licensed operators (in-cluding ISPs) to contribute towardsthe Rural Telecommunication Devel-opment Fund (RTDF), with contribu-tions starting in 1999/2000. Intheory, any licensee may bid to usethe funds.

The NTC has around 200 or so “recog-nized” Public Call Offices (PCOs)around the country, which get a mod-est reduction on long distance callcharges and in some cases a monthlysubsidy. There are around 1’000 or sounlicensed Public Call Centres (PCCs)around the country, mainly in theKathmandu region, which seem to of-fer the main hope for extending ac-cess. The PCCs offer a range of servicesincluding long distance and interna-tional telephone, fax, call-back, pho-tocopy, Internet, e-mail, air tickets etc.PCCs are helping to grow the next gen-eration of entrepreneurs. In othercountries, one might expect the PCCsto be selling mobile phones but this

Figure 2.3: Sources of revenue

Revenue for Nepal Telecommunications Corporation, in millions of Rupees, in FY 1998 and in 1993-98

Source: Adapted from NTC annual report, various years. Financial year ending July 15.

Fixed charges & local calls, 17.0%

Long-distance,

18.9%Int'l collection

charges, 30.2%

Int'l net settlements,

28.9%

Other, including leased lines, interest, Intelsat etc, 5.1%

NTC revenue 1997/98: Total 4'321 m Rps (US$65m)0

1'000

2'000

3'000

4'000

5'000

1992 1993 1994 1995 1996 1997 1998

OtherInt'l net settlementInt'l collection chargesDomestic

NTC revenue by source, 1992-1998 (million Rps)

does not seem to be the case. Indeed,the NTC seems to look down on thePCCs. It does not know how manythere are and does not seem to care.The private sector seems to be takinga more enlightened approach and sev-eral of the PCCs are agents for the pri-vately-run ISPs and radio-pagingoperators.

It is planned that the new mobile li-censee will have an obligation to in-vest at least 15 per cent of its revenuein rural areas, as defined by the regu-lator. However, it does not appear thatthe existing mobile operator (NTC)carries this obligation. Furthermore,since the new mobile operator is notable to provide international service,this constraint on its license may onlyserve as a further deterrent to possi-ble investors.

2.1.5 International service

2.1.5.1 International trafficLike many small developing countries,Nepal is highly dependent on revenuesfrom international services. This is re-flected in the fact that almost 60 percent of NTC’s revenue comes from in-ternational services, of which half isfrom collection charges and the restfrom international net settlements (seeFigure 2.3). Indeed, the level of de-pendence on international net settle-

11

ments as a percentage of overall rev-enue has increased from 7 per cent in1991/92 to 29 per cent in 1997/98.

Nepal has international connections withsome 20 different countries (mainly viaINTELSAT) and offers direct dial serv-ice to more than 130. Recently, home-country direct services have beenestablished to five major destinations.Nepal’s top international traffic desti-nation is India, though much of the traf-fic to India is cross-border and isconducted outside the international ac-counting rate system. For incoming traf-fic, India is again the main source, witha total of just over 10 million minutesin the year to June 1999, of which themajority was from cross-border (viaIndia’s DoT) rather than internationaltraffic (via India’s VSNL).

For international traffic passingthrough the accounting rate system,the major source is the United States.As Figure 2.4 (right chart) shows,Nepal has a ratio of incoming to out-going traffic with the United States ofaround nine to one, a ratio, which hadcontinued to grow throughout the dec-ade until 1999. This is consistent withother developing countries (for in-

stance, India’s ratio in 1997 was 11:1and Vietnam’s was 40:1). This ismainly due to the fact that the UnitedStates is home to the major call-backservice providers. Nepal has nominallybanned call-back, though there is nolaw stating this and the service iswidely advertised on the streets ofKathmandu. Furthermore, the in-crease in settlement revenue over thelast few years suggests that call-backis widely practiced.

The result is that US operators madenet settlements (excluding transit pay-ments) of some US$5.7 million in1998. However, the picture appears tobe changing. In the first seven monthsof 1999, the annualised rate of trafficreported as incoming from the UnitedStates (AT&T) was down by just over30 per cent with a particularly big fallin July, the same month that VSAT datatraffic began to be delivered to Nepal.The same pattern is true also for theUnited Kingdom where incoming traf-fic from BT fell by almost 40 per cent.Interestingly, in the same month, in-coming traffic from all other sourcesgrew by 28 per cent suggesting thatrefile traffic may be growing. While itwould be unwise to draw conclusions

Figure 2.4: Nepal's international telephone traffic

Incoming international traffic, by origin country, 1998/99, and Nepal's traffic and settlementswith the United States, 1994-99

Note: In the left chart, the breakdown shows the immediate origin of traffic, not necessarily the real origin (i.e.,includes transit traffic). It is based on the 12 months ending July 1999. In the right chart, the figures for 1999 areestimated based on the first seven months of the year. The data are for calendar years ending 31 December.Source: NTC, FCC.

India/ DoT, 31.9%

India/ VSNL 7.3%

US, 19.6%

UK, 16.7%

Other Europe,

0.7%

Hongkong SAR,

13.7%

Other Asia-Pacif ic, 10.1%

Nepal's incoming int'l traffic, 1998/99: Total = 26.2m mins

0

2'000

4'000

6'000

8'000

10'000

1994 1995 1996 1997 1998 1999*

Tra

ffic

(th

ou

san

d m

ins)

0

2'500

5'000

7'500

Net

set

tlem

ent

(US

$000

)

Net settlement

US to Nepal

Nepal to US

International traffic and settlements w ith US


12

Nepal Case Study

Table 2.2: Major telecommunication indicators for Nepal

Note: 1) Yearly estimate from average per month for Kathmandu Valley exchanges. 2) Additions to fixedassets. 3) Estimate.Source: Nepal Telecommunications Corporation (NTC).

1990-1999, Year Ending 15.7 unless otherwise noted

Unit 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

TELEPHONE NETWORK

Main telephonelines in operation 57’320 64’894 68’886 72’683 75’637 83’713 112’645 139’989 208’387 247’214

Capacity used ... ... ... ... 88.8% 85.2% 77.9% 77.8% 81.5% 85.8%

Main telephone linesper 100 inhabitants 0.32 0.35 0.36 0.37 0.38 0.41 0.54 0.66 0.95 1.11

Residential main linesper 100 households 3) 1.69 2.08 2.14 2.13 2.12 2.35 3.22 3.78 5.32 6.16

% digital main lines % 89.5 86 86 87 89 99.2 99.8 99.3 100 100

Waiting listfor main lines 72’434 88’548 126’817 130’009 136’221 153’751 202’363 243’444 277’997 269’025

Total demand 129’754 153’442 195’703 202’692 211’858 236’474 315’008 383’433 486’384 516’239

Satisfied demand 44.2% 42.3% 35.2% 35.9% 35.7% 35.0% 35.8% 36.5% 42.8% 47.9%

Public payphones 248 266 341 321 494 494 835 ... ... ...

Districts havingexchanges ... ... ... 30 30 31 54 57 60 65

% of total ... ... ... 40.0% 40.0% 41.3% 72.0% 76.0% 80.0% 86.7%

Village DevelopmentCommittees served ... ... ... ... ... ... 950 1’200 1’675 1’535

% of total ... ... ... ... ... ... 23.8% 30.0% 41.9% 38.4%

TRAFFIC

Local telephone calls 10x3 ... ... 169’343 193’789 215’279 330’700 440’900 ... ... ...

Per subscriber,per month ... ... 205 222 237 333 326 ... ... ...

National trunktelephone (calls) 10x3 ... ... 19’035 22’779 29’033 42’700 57’300 ... ... ...

Int’l outgoingtelephone (minutes) 10x3 7’091 9’111 10’405 11’510 13’410 14’600 16’533 17’326 19’100 25’100

Int’l incomingtelephone (minutes) 10x3 6’373 9’394 14’230 16’400 17’500 20’600 25’600 31’000 28’900 22’900

Int’l bothwaytelephone (minutes) 10x3 13’464 18’505 24’635 27’910 30’910 35’200 42’133 48’326 48’000 48’000

STAFF

Full-time telecom-munication staff 3’502 3’546 3’413 3’599 3’483 3’877 4’078 4’151 4’529 4’671

QUALITY OF SERVICE

Faults per 100 mainlines 1) % 192 180 168 156 200 262 180 120 80.4 78.8

REVENUE

Total telecomservices (NRs) 10x6 699 1’147 1’316 1’818 1’905 2’147 2’677 3’320 4’321 4’633

Total telecomservices (US$) 10x6 $ 24 $ 31 $ 31 $ 37 $ 39 $ 41 $ 47 $ 57 $ 65 $ 68

Revenue per line $ 415 $ 474 $ 447 $ 515 $ 510 $ 500 $ 419 $ 409 $ 314 $ 275

CAPITAL EXPENDITURE

Annualtelecommunicationinvestment (NRs) 2) 10x6 696 755 311 99 540 879 1’695 1’163 1’475 1’873

Annual telecom.Investment (US$) 10x6 $ 24 $ 20 $ 7 $ 2 $ 11 $ 17 $ 30 $ 20 $ 22 $ 27

13

on the basis of one month’s data, andthere may be other reasons for thechange (for instance, re-routing oftransit traffic) the available evidencewould seem to point towards an in-creasing percentage of traffic fromAT&T and BT being diverted outside theaccounting rate system, possibly viathe Internet (see section 3.3). If July1999’s trend had continued for the restof the year, the lost revenue to NTCwould have been around US$4-5 mil-lion, or just under 10 per cent of totaltelecommunications revenue.

2.1.6 Market indicators

Table 2.2 provides a listing of the ma-jor telecommunication indicators forNepal extracted from the ITU Yearbookof Statistics.

2.2 Information Technologysector

This section reviews key organizationsin the IT sector, the status of the com-puter hardware and software marketsand Internet service provision. Govern-ment ministries with a direct role in ITinclude the MST and MOIC (yet ironi-cally it seems that neither even has aweb site!). The former is the co-ordinating agency for IT in the coun-try while the latter provides oversightfor the telecommunication, postal,mass media and broadcasting sectors.Most major industries in Nepal havean association. The Computer Associa-tion of Nepal (CAN, <http://www.caninfo.org>) fulfils this role forthe IT industry. Created in late 1992,CAN’s 40-60 institutional and2-3’000 individual members includevendors, software developers andother professionals involved in Nepal’scomputer sector. It sponsors the an-nual Info-Tech show with between 50-60 exhibitors and 10’000 attendees.Another IT-related organization is theNepal Internet Users Group (Nepaliug,<http://www.nepaliug.org.np>). Itwas started in 1997 to serve theInternet community in Nepal. Else-where such groups sometimes play anational educational role, or at least aconsciousness-raising role, with regardto the Internet, e.g., through short

courses, well advertised lectures, ect.The NIUG has some ambitions alongthese lines. However, membership isstill very small, with less than 200 in-dividuals belonging.

2.2.1 Computer market

There are around 100 companies sell-ing computer equipment in the coun-try. As there is no domestic computermanufacturing industry, all hardwareis imported. This includes brandedunits (e.g., IBM, Dell, Compaq, etc.)as well as unbranded parts that arethen assembled in Nepal. There is noofficial data on the size of the compu-ter hardware market. However sinceall computer equipment is imported,estimates can be derived from tradedata. Statistics compiled by an indus-try association show that the value ofcomputers and parts imported intoNepal for the 1998 fiscal year (latestyear for which data are available) wasUS$ 6.26 million.6 This data indicatesthat the value of imports of comput-ers and parts rose through mid-1995and then declined (see Table 2.3). Thisis curious given that the Internetstarted in Nepal in 1995, and this mighthave been expected to cause a sharprise in computer imports.

The drop in import value might be ex-plained by falling prices, but unfortu-nately data on the number ofcomputers imported is not available.Another explanation might be the In-dian computer market. Until recently,personal computers in Nepal werecheaper than in India. This encouragedthe re-export of PCs from Nepal to In-dia. Since the liberalisation of the In-dian computer market, fewercomputers are being re-exported fromNepal. Yet another explanation is thatequipment is imported via distributorsin Singapore or Hongkong SAR and notcaptured in official statistics. Conver-sations with various sources suggestthat the number of PCs sold in Nepalin 1999 was between 10’000 – 15’000units and that the stock of PCs in thecountry could be as high as 100’000.However, ITU research suggests thatthe number of PCs in the country isaround 60’000. This places PC penetra-tion in Nepal at 0.27 per 100 inhabit-


14

Nepal Case Study

ants, slightly lower than India and Pa-kistan but above Bangladesh.

Both branded and assembled PCs aresold on the market. It is estimated thataround 75 per cent of PCs sold areassembled (e.g., non-branded clones).Transport is estimated to add about10-12 per cent to the price of a PC.Customs duty is 12 per cent and salestax is 10 per cent.7 A fully equippedPentium III branded PC sells for aroundUS$3’000 while a clone is available forless than Rs. 65’000 (aroundUS$ 1’000). These prices are not sub-stantially higher than what is availablein more developed countries but, giventhe low incomes in Nepal, they arebeyond the reach of the majority ofthe population.

The computer software market prima-rily consists of customization ofbranded accounting and financial soft-ware. According to one estimate, thereare around 25 companies engaging insoftware development.8 No figures areavailable on imports or sales. One areaof native software development hasbeen in the development of packagesutilizing the Nepali font.

2.2.2 The Internet market

In 1994, the first companies appearedon the market offering dial-up emailservice (via UUCP). Mercantile OfficeSystems became the first Internet

Table 2.3: Imports of computers and parts

Note: a) Converted at annual average exchange rate. b) Based on a value of US$ 1’500 per PC for 1992-1997and US$ 1’300 for 1997/98. Figure for 1998/99 based on low end of industry estimate for 1999. c) Based onrounded figure of additions for each year. Assumes no replacement.Source: ITU adapted from Research and Information Division of FNCCI from various publications of NepalRastra Bank.

1992/93 1993/94 1994/95 1995/96 1996/97 1997/98 1998/99

Imports of Computersand Parts (Rs m) 436 792 1’307 1’043 485 413

Imports of Computerand Parts (US$ m) a) $ 8.97 $ 16.04 $ 25.18 $ 18.41 $ 8.37 $ 6.26

Estimated PCimports (units) b) 6’000 11’000 17’000 12’000 6’000 5’000 10’000

Estimated PC stock c) 10’000 15’000 30’000 40’000 45’000 50’000 60’000

Service Provider (ISP) in mid-July 1995when it established an online interna-tional link via NTC to SingaporeTelecom. WorldLink and Computerlandfollowed a year later. The legal statusof these pioneering ISPs was vagueuntil 1997 when the new Telecommu-nications Act formalised a licensingprocedure.

In January 2000, there were elevenlicensed Internet Service Providers(ISPs) of which at least nine were op-erational (see Table 2.4).9 Besides pro-viding service to residential andbusiness users, these ISP also resellservice to specialized providers (e.g.,HealthNet, which subscribes to Mer-cantile’s ISP services and in turn pro-vides a discounted ISP service to thehealth community) and public call of-fices and cybercafés. The number ofInternet subscribers was almost 9’000at January 2000.

Estimating the number of Internet us-ers in the country is difficult.

• No known surveys have beencarried out, either by the Cen-tral Bureau of Statistics or bymarket research groups.

• There are large variations inthe ratio of subscribers to us-ers. While a multiplier of threemight be appropriate for resi-dential subscribers, the ratio

15


between business subscribersand users can vary tremen-dously. For example, Health-Net is one subscriber but it hasaround 500 users.

• The majority of users in Nepalare primarily utilizing e-mailrather than full-blown Internetservices.

Table 2.4: ISPs in Nepal

Note: * These ISPs did not reply to an NTA questionnaire casting doubt on whether they were actuallyoperational at January 2000.Source: ITU adapted from National Telecommunication Authority and ISP data.

Situation at January 2000

Name Start-up Date Subscribers Staff Web site

1 Worldlink 1996 4’350 71 <http://www.wlink.com.np/>

2 Mercantile 1995 1’347 28 <http://www.mos.com.np/>

3 Computerland 1996 887 37 <http://www.ccsl.com.np/>

4 Capital Online 1999 650 68 <http://www.col.com.np/>

5 Unlimited Nu Media Nov-99 555 28 <http://www.unlimit.com/>

6 Infocom 1999 500 30 <http://www.info.com.np/>

7 Everest Net Sep-99 373 17 <http://www.multinepal.com.np/>

8 Himilayan Jul-99 190 22 <http://www.hons.com.np/>

9 Global Internet Service*

10 Network Technologies*

11 HTP Communications* <http://www.htp.com.np/>

Nepal 8’852 301

An estimate of 35’000 Internet us-ers (including e-mail only) in Nepalat the end of 1999 seems reason-able, based on the consensus of vari-ous estimates and the mix of home/business subscribers reported by theISPs. A goal of 100’000 users by theyear 2000 has been promoted by theindustry. Figure 2.5 shows thegrowth in estimated users over the

Figure 2.5: Internet users in Nepal

Estimated Internet users by year, 1995-1999, and by Sector, May 1999

Source: Left chart: ITU estimates. Right chart: Network Startup Resource Center as reported by Dileep Agrawal,May 1999.

16

Nepal Case Study

last several years as well as the mixof users.

One estimate puts the value of theISP market at over US$ 1 million for199810; however based on the rev-enues reported to the regulatory au-thority of two of the three ISPs thatwere in operation that year, the fig-ure was closer to US$ 0.5 million11 .No precise figures exist on the vol-ume of traffic generated by Internetuse in Nepal. However, estimatesbased on modem usage extrapolatedfor the entire industry suggest thatdial-up traffic during December 1999was over 3 million minutes.

A major development for the ISPswas the 1999 government decisionto allow them to have their own in-ternational connectivity using VSATtechnology. This increased interna-tional Internet bandwidth from320kb in May 1999 to over 5MB bythe end of 1999 (see Table 2.5). Itwould not be overstating the case tosay that this limited step towardsmarket liberalisation has trans-formed the market.

Table 2.5: International Internet Capacity

Note: 1) These companies have VSAT operator licences and also lease capacity to downstream ISPs in Nepal.Source: ITU adapted from ISP information.

VSAT operator / user 1) Bandwidth VSAT users (ISP) Bandwidth

Mercantile 3MB down / 1MB up HON 128 kbit/s(via Singapore Telecom CCSL 64+240 kbit/s down /-STIX) 32 kbit/s up

Everest 128 kbit/s down /64 kbit/s up

NuMedia n.a.

WorldLink 2MB down / 128 kbs up [own use] 2 MB down planned.(via Thaicom) Actual down link

512 kbps at January 2000.

C&C Via Loral satellite InfoCom 240 kbit/s down /64 kbit/s up

HTP n.a.COL n.a.

2.3 Mass media

Discussion of the Internet takes placein the context of broader infrastruc-ture and social concerns, where sig-nificant inequities and disparities maybe observed in the availability of serv-ices. The Western and rural portionsof Nepal are under-served in all dimen-sions. Electricity has reached onlyaround 15 per cent of the nation, inspite of the availability of free-flowingwater for potential power generation.While the overall literacy rate has in-creased to approximately 40%, thereare wide variances by gender, regionand ethnic community (see Table 2.6).Newspaper publishing is also highlyskewed by region and language(see Table 2.7).

These are not newly discovered orpoorly documented problems. Inequityhas played a political role throughoutNepalese history, and the value of two-way communication for health care,industrial and construction operations,agriculture, equipment maintenance,and air transport in remote areas waspointed out in a report on radio broad-casting and telecommunications

17

25 years ago. Still, Nepal was one ofthe last nations to begin TV broadcast-ing and international email, and a 1996survey found the effectiveness of theNepalese mass media circumscribed byincapacity to reach remote areas. Thesame study shows Nepalese mediapenetration trailing that of China, In-dia, Pakistan and Bangladesh in manyways. More specific findings include:

• Most Nepalese have either noaccess or have poor access tomass media.

• A substantial portion of thepopulation does not use thenational mass media.

• Although the propensity toidentify local problems and dis-cuss issues appears to be fairlywidely prevalent among thepopulation at large, the abilityto draw the attention of theauthorities to local needs andproblems, and to use the me-dia to publicize them, is limited.

People in the South, East andKathmandu valley have better accessto, and use of, the media than others.The same holds for urban people, men,

Table 2.6: Literacy, as percentage of populationwhich is six years and older

Source: Nepal Human Development Report, UNDP, 1998, <http://www.nepali.net/undp/keydoc/nhdr98/contents.html>.

Male Female Total

Development Region

Eastern 54.2 29.57 41.8

Central 50.19 20.75 35.21

Western 58.24 32.82 44.47

Mid-West 46.94 17.6 31.89

Far West 48.98 14.85 31.31

Ecosystemic Region

Mountains 43.44 13.42 27.73

Hills 61.75 31 45.51

Tarai 45.4 19.92 32.61

young people and those with educa-tion, money, and fluency in multiplelanguages. This history leads us to thequestion of political will, without whichno pilot study or infrastructure invest-ment will be meaningful. There areforces that tend to preserve the sta-tus quo in all nations. In some cases,political and economic advantages areprotected, and in others alternativesand opportunities are simply not seen.

2.3.1 Broadcasting

2.3.1.1RadioRadio Nepal has been broadcastingsince April 1951. It uses both ShortWave and Medium Wave frequencies.FM radio, covering Kathmandu valley,was started in 1995. Medium wavetransmission, covering between 80-90% of the population, has the widestreach of any mass medium in the coun-try. There are 15 hours of transmissionper day including 2 hours of regionalprogramming. Radio Nepal launched anInternet service in 1997 (the web siteis <www.catmando.com/news/radio-nepal/radionp.htm>). It is partciularlypopular with overseas Nepalese. Thereare plans to expand the service fromNepali and English news to include otherprogrammes and music. Radio Nepalemploys around 600 staff.


18

Nepal Case Study

Table 2.7: Regional distribution of newspapers

Source: Aditya, Anand, Editor, Mass Media and Democratization, A Country Study on Nepal, Institute forIntegrated Development Studies, Kathmandu, 1996.

Nepali English Newari Hindi Bhojpuri Total

Kathmandu Valley 102 11 5 2 0 120Tarai 160 0 0 2 1 163Hills 27 0 0 0 0 27Mountain 0 0 0 0 0 0Total 289 11 5 4 1 310

2.3.1.2Television

Television came relatively late to Ne-pal. Government owned Nepal Televi-sion (NTV) began broadcasting in 1985at a time when there were less than500 TV sets in the country, used mainlywith video cassette recorders or forreceiving Indian television pro-grammes. When NTV went on air, withits initial thirty minutes transmission,the number of TV sets increased dra-matically.

NTV covers about 42 per cent of thecountry’s population and 32 per centof the land area. It has ten transmit-ting stations. It estimates that it has2.5 million viewers across the coun-try, around 10 per cent of the popula-tion. The number of TV sets in Nepalis estimated at around 150’000, mak-ing it one of the few countries in theworld where television density is lowerthan telephone density. Two major con-

straints to extending television broad-casting are lack of electricity and thehilly and mountainous terrain. As itwould be very expensive to serve theentire country with terrestrial televi-sion, the use of satellite is being ex-plored. Funds have been allocated inthe 9th Five Year Plan for this purpose.Satellite will also help Nepalese abroadstay informed about what is happen-ing in the country. It is also planned tohave a distance education channel.

NTV transmits 61 hours of programmesper week. The mix is 30% news re-lated (including three daily news pro-grammes; one in English); 50%locally-produced and 20% foreign. Ithas two production studios inKathmandu. Another one is located inKohalpur in the Western region andthere are also plans to build one in theEastern region. There is no televisionlicense fee system in Nepal. Funding

Table 2.8: Broadcasting indicators

Source: ITU adapted from Sources shown. Nepal TV web site is: <http://www.explorenepal.com/ntv/main.html>

Status in 1999

Indicator Value Source

Population covered 42% NTVLand area covered 32% NTVTelevision sets 150’000 ITU estimate. Last available data from UNESCO

is for 1997 with an estimate of 130’000.Televisions per 1’000 inhabitants 6.9Cable TV companies ~80 MoICCable TV subscribers 60’000 – 70’000 MoIC

19

for NTV comes from the governmentbut as that is insufficient, NTV solicitsadvertisements and also sells its locallyproduced programmes (particularlydocumentaries) to overseas broadcast-ers. NTV has around 300 staff.

In addition to NTV there are two pri-vate television channels broadcastingin Kathmandu. There are also around

80 cable television companies oper-ating in the country. A license is re-quired from the MoIC. The largest isSpace Time Network. There are anestimated 60’000 – 70’000 cable tel-evision subscribers. There is littletalk about using cable television in-frastructure for either telephony orInternet access (through cable mo-dems).


5 The text of which is available at: <http://www7.itu.int/treg/legislation/nepal/law.htm>6 <http://www.fncci.org/fncci/text/imother.txt>.7 There is some controversy that computer importers are being overcharged for taxes. See Source: “VAT and

the IT Inedustry,” by Prakash Khanal. In, PC Quest Nepal. 10-13th April, 1998. Kathmandu, Nepal. <http://www.panasia.org.sg/nepalnet/economics/vat&it_industry.htm>.

8 See IT Nepal Message #12. <http://www.listbot.com/cgi-bin/subscriber?Act=view_message&list_id=it_nepal&msg_num=12&start_num=13>.

9 Although NTC does not currently provide ISP service to end users, it had been active providing the backboneinternational link until the VSAT market was liberated in 1999. As the incumbent PTO, it is free to provide anytelecommunication service without applying for a license.

10 “Internet users and organisations in Nepal handed over more than $1 million to their ISPs last year - a figurethat could go as high as $5 million by 2001.” See Vivek S. Rana. “Internet War: The on-line corporation.Choosing the right Internet Service Provider.” Cyber Post. Kathmandu, Wednesday September 29th, 1999.<http://www.nepalnews.com.np/contents/fortnightly/cpost/1999/Sep/Sep29/computer.htm>.

11 The royalties (4% of gross income) paid in 1997/98 were 511 k Rps paid by Worldlink and 384 k Rps paid byMercantile who, together, account for 64 per cent of the total market, by number of subscribers.

20

Nepal Case Study

3. Internet and telecommunications

3.1 Role of incumbenttelecommunicationoperator in Internet

The incumbent telecommunicationoperator, NTC, has thus far played alimited role in the development ofInternet in the country. Prior tomid-1999, it had a monopoly on in-ternational data connectivity, andISPs were forced to rely on NTC fortheir international connections to theInternet. NTC was not very cus-tomer-oriented in terms of pricing,bandwidth (only 64 kbit/s links wereprovided) or service. As a result,several ISPs established their own in-ternational gateways when the mar-ket was liberalized, obtaining higherbandwidth at a cheaper cost. Theyalso provided upstream connectivityfor the remaining ISPs. NTC was leftwith no customers and this lucrativerevenue stream ended.12

NTC still retains a monopoly on wiredconnections, including conventionaldial-up telephone lines and leasedlines. It provides 64 kp/s leased cir-cuits to users that want higher band-width. Revenues from leased lineswere US$ 740’000 in the 1997/98fiscal year, up 28 per cent over theprevious year. However these rev-enues are certain to fall, since asmentioned, all ISPs defected fromNTC for their international connec-tivity. As a result, NTC’s internationalleased circuit customers declinedfrom 13 to 9; though it has 23 na-tional leased line customers. Thus farNTC has been unable to providehigher speed circuits. ISPs also claimthat NTC is slow to fulfil requests forleased circuits and as a result, anumber of them provide wirelessleased circuits to their customers.The ISPs also complain that there isa long wait for dial-in telephone linesand that they have to pay a premiumto obtain telephone lines. Again, thisis a source of lost revenue for NTC

since the dial-up lines generate sub-scription and traffic revenue. Thedelay in providing dial-up lines af-fects the ISPs business and makestheir subscribers angry since thereis often congestion.

NTC’s indifference to the needs of theISPs would be understandable if itprovided an ISP service but at thetime of this report it did not. NTChas ambitions to provide Internetservices and has set up a New Serv-ices Department to handle thesekinds of activities. NTC has a 2 Mbit/s VSAT gateway with Intelsat. Thedirection of NTC’s Internet activitiesis unclear (national exchange, inter-national gateway provision or retailISP services?). In its latest AnnualReport, NTC states it would be “offer-ing Internet service as hub for ISP andfor its own internal use…local ISPs canhave direct international link via NTC’snetwork at the reasonable rate”.

NTC has also had a X.25 / X.75 packet-switch data network (dedicated ordial-up) since 1995. However use ofthis network is declining. In Novem-ber 1999 it had 18 subscribers.

NTC has a web site offering basic in-formation about the company as wellas tariff and other customer informa-tion (<http://www.ntc.com.np>).

3.2 Pricing structure forInternet services

The liberalization of the VSAT marketand the entry of new ISPs have re-duced prices for dial-up Internet ac-cess. In January 2000, Nepal had thelowest dial-up Internet tariffs in theSouth Asia region (based on 15 hoursof monthly use, the most commonentry level plan in the region: see Ta-ble 3.1). Connection charges are, how-ever, relatively high and though usagecharges are low compared to neigh-bouring countries, they still remain

21


beyond the reach of the average Nepali(the annual charge for 15 hours ofmonthly dial-up use is equivalent to65 per cent of GDP per capita). Con-sidering the low incomes and the factthat most Internet usage in the coun-try is e-mail, cybercafé and e-mail tar-iffs may be more relevant. EasylinkCybercafé, for instance, charges NRs.3.00 / Min (US$2.62/Hour) for fullInternet access. There is a wide rangeof packages available ranging from perminute charges, to a certain numberof hours per month to unlimited ac-cess. There are also different packagesfor different time of day use.

There are no “Internet-friendly” tariffprogrammes for the telephone usagecharge. There is no nationwide dialprefix for Internet access meaning thatusers located outside an ISP’s POP (ba-sically the whole country outsideKathmandu) will incur long distance callcharges. Users within an ISP’s POP areapay the local call charge13 ; there is noprovision for reduced tariffs forInternet access. The ISPs have pro-posed abolishing Internet accesscharges and sharing the telephone callcharge with NTC. So far, this has notbeen acted upon.

Table 3.1: Internet dial-up tariffs in South Asian countries

Note: These are the lowest priced plans for 15 hours per month. Extra hours are billed at peak rate. Notincluding tax. National currency prices are converted to US$ using 31 January 2000 exchange rates.Source: ITU adapted from ISP tariff schedules.

Based on a minimum of 15 hours per month of dial-up use, peak rate, US$, January 2000

Country ISP Plan Hours ISP Monthly ISP Telephone included Connection charge (US$) usage charge

(US$) (US$)

Bangladesh BOL Asheem 15 $59 $31 $9.97

Bhutan Druknet Casual 15 $34 $34 $6.88

India VSNL Plan 25 25 $2 $10 $5.50

Maldives DhivehiNet Dial-up access unlimited $43 $21 $19.29

Nepal Capital Online Plan B 20 $51 $7 $4.36

Pakistan Supernet Basic 15 15 $- $10 $8.09

Sri Lanka Lanka Internet Classic 11 $41 $13 $4.52

SAARC average $32 $19 9.02

3.3 Regulatory status ofInternet

3.3.1 Internet Service Provider(ISP) market

The ISP market is competitive. Becom-ing an ISP requires a license from NTA.The term of the license is for five years.The ISP license costs Rs 300’000 (US$4’386). In addition, ISPs must pay 4per cent of gross revenue to NTA pluscontribute 2 per cent of gross revenueto the Rural Telecommunication Devel-opment Fund. Eleven ISPs had receivedlicenses by January 2000. ISPs are al-lowed to provide their own interna-tional gateway using VSAT. They musthowever apply for a VSAT provider li-cense. ISPs using a VSAT gatewaymust also apply for a user license. TwoISPs (Mercantile and WorldLink) cur-rently provide and use VSAT. Anothercompany, C&C, provides VSAT servicesto several ISPs.

3.3.2 Top level domain name

Mercantile Office Systems, the coun-try’s first ISP, is the administrator forthe Nepal country code top level do-main (ccTLD, (“.np”)).14 Registrationof a host using the .np ccTLD is free.Hosts can be registered under these

22

Nepal Case Study

2nd level domains: COM.NP (Com-mercial), ORG.NP (Organization),EDU.NP (Education), NET.NP (Net-works) and GOV.NP (government). InJanuary 2000, there were 405 regis-trations of which 192 were reachable.In contrast, the Internet SoftwareConsortium reported 290 hosts reach-able under the .np ccTLD in its Janu-ary 2000 survey. There are restrictionsagainst trading in or using knowntrade names. Although desirable, the.np host does not have to be physi-cally located in Nepal. However, ex-cept for large multi-nationalcompanies, there must be at least oneadministrative contact for the domainname in Nepal. All disputes related tothe .np ccTLD are to be settled by acourt with jurisdiction in Nepal. Thegrowth of .np hosts had been moder-ate since 1997 suggesting that eithermost Nepali organizations aware of theInternet have already registered orthey are using other TLDs (e.g.,“.com”). However the number of hostsalmost doubled in 1999 (see Figure3.1). It should be noted that many, ifnot most web sites in Nepal, do notuse the .np domain name.

Mercantile has offered to transfer re-sponsibility for the .np domain nameto the NTA. Unlike other ccTLDs suchas .nu, .to, or .tv15 , there does notappear to be as much “cachet” with.np. Thus, there is little scope for com-

Figure 3.1: Nepal's domain name

Number of .np hosts, 1995-2000 and distribution of 2nd level .np domain names, January 2000

Note: The .np domain first became active in January 1995.Source: ITU adapted from <www.isc.com> and Mercantile Office Systems.

Hosts registered under .np

1960

139 153

290

1995 1996 1997 1998 1999

mercialising the .np ccTLD. One ex-ception may be that .np is related to“Nippon”, which may explain whythere seem to be a relatively largenumber of Japanese hosts using .np.

3.3.3 IP telephony

Nepal’s settlement rate for traffic withthe US is 84 US cents per minute (asof 6 January 2000), well above FCCbenchmarks ITU Focus Group indica-tive target rates. With BT, the rate is68 US cents per minute (as of Octo-ber 1998). However, the internationaltelecommunications arbitrage site,Arbinet (www.arbinet.com), offers astermination rate of just 53 US centsper minute, suggesting there arecheaper ways of terminating traffic inNepal than via the formal accountingrate mechanism. The high accountingrate certainly creates the incentive foralternative routing. This would seemto explain the recent decline in inter-national incoming traffic from theUnited States (see Figure 2.6).

One possible way to bypass the account-ing rate system is via Voice over IP(VoIP). The formal situation is that VoIPis illegal in Nepal as it is seen as im-pinging upon NTC’s international voiceservice monopoly. While the regulatortakes a neutral view on the matter, ar-guing that IP telephony is almost im-possible to block. The policy-makingbody, MoIC, has obliged the regulator

EDU7%

GOV3%

COM63%

ORG19%

NET8%

Reachable .np websitesJanuary 2000

Total: 192

23

to make clear to the ISPs in the coun-try that VoIP is illegal.16 In Janu-ary 2000, NTA was obliged by MoIC tosend a notice to all ISPs instructing themto block the Dialpad (<http://www.dialpad.com/>) IP telephony serv-ice, which offers free calls to the UnitedStates. The ISPs duly contacted theiruser base to inform them of NTA’s no-tice. However, given that Fax over IP isliberalised (requires a license), and thatit is virtually impossible for ISPs to dis-tinguish between VoIP and Fax over IP,it would be surprising if the ISPs wereable to comply with this ruling. Indeed,some cybercafés openly advertise VoIPon their web sites.

The position that MoIC has taken overVoIP is partly a “moral” one, abiding bythe terms of the International Telecom-munication Regulations, but also a self-interested one, given the close tiesbetween MoIC and NTC. Ironically, themain usage of VoIP may not be outgo-ing traffic from Nepal but rather incom-ing international calls. While it is difficultto obtain concrete evidence, it appearsto be the case that some incoming in-ternational voice traffic is coming in overthe Internet and then breaking out intothe PSTN locally. This service is rela-tively easy to provide now that VSATdata services have been liberalised andmore than 5 MB of capacity is availableto private ISPs. One contact describedbeing offered tens of thousands of USdollars to host such a service, an offer,which was refused, though others maynot have been so circumspect. Giventhat the lines rented by ISPs are likelyto show large volumes of incoming traf-fic, it would be relatively easy to hideincoming voice traffic, worth around ahundred times more per minute, mixedin with incoming IP data and fax traffic.

Thus the “moral” position on VoIP be-comes hard to justify. Why play by therules when the rest of the world ischeating? Indeed, the “moral” positionbecomes arguably “immoral” when oneconsiders that by blocking outgoingVoIP while being unable to block in-coming VoIP, Nepal is suffering twiceover: NTC is losing out on valuable in-coming net settlements while Nepaleseare losing out on the chance to makelow-cost foreign calls.

3.3.4 Universal service / access

Nepal faces an immense task in en-hancing access to communications.Overall teledensity (main telephonelines per 100 inhabitants) is just overone, with wide variations between ur-ban and rural areas. Access to Internetis concentrated in the Kathmandu area,with POPs in less than half a dozenother towns. Given the low level ofcommunication infrastructure, it isclear that the country’s primary goalshould be to ensure widespread accessto communications facilities at afford-able rates (universal access) ratherthan concentrating on universal serv-ice (provision of communications ac-cess to each household).17

The following universal service goalsare stated in the 1999 Telecommu-nications Policy document:

• “To make available the tel-ephone service as per the de-mand and to provide new andrecent telecommunicationservices in accordance with thedemand of the market in ad-dition to the basic telephoneservice.”

• “To make arrangements formaking the basic telecommu-nications services universallyaccessible to those who do nothave separate telephone linesof their own.”

• “To make available the basictelephone services in remoteand inaccessible rural areasalso of the Kingdom.”

The government is tackling universalaccess goals through two maininitiatives: (1) Provision of publictelephones and (2) the RuralTelecommunication DevelopmentFund (RTDF).

The Telecommunication Policy docu-ment outlines three areas of how pub-lic telephones will be made morewidely available (1) encouraging NTCto further install public telephones;(2) allowing the private sector to op-erate public telephones; and (3) al-lowing telephone services to be resold.


24

Nepal Case Study

There are actually two components toextending access in rural areas. Thefirst is a commitment by NTC to pro-vide at least two telephone lines in eachVDC as part of its ‘Special Rural Tel-ecommunications Programme.’ A sec-ond component is the RTDF to whichall telecommunication licenses (includ-ing ISPs) must contribute 2 per centof their annual revenue. Additionalfunds received from the governmentor international development agencieswill also be deposited in the RTDF. Asthe RTDF has not been used yet, it is

unclear exactly how it will work noris it clear whether anyone can pro-vide services drawing on RTDF fundsor just NTC and the forthcoming sec-ond basic service licensee. The Policydocument does vaguely state that“the private sector will also be en-gaged to operate telecommunicationservices in rural areas.” Anotherclause of the TelecommunicationPolicy document states that serviceproviders must invest at least 15 percent in rural locations in the areasthey operate in.

12 It is estimated that NTC made around US$200’000 a year from its Internet connectivity (8’000 per month fora 64 kbit/s link to two ISPs).

13 The first 100 local calls are included with the subscription charge. After that, local calls are charged at Rs 1per 3 minutes peak time and 6 minutes off-peak time.

14 Information about registering a host under the .np domain is available at <http://www.mos.com.np/domains/default.htm>.

15 .nu is Niue; .to is Tonga; .tv is Tuvalu. As with several others, these ccTLDs are marketed commercially asthey have a specific meaning in English or other languages and thus add a certain “cachet” to a URL.

16 See “NTA Bans VoIP.” The National NewsMagazine. January 28 - February 03 2000.17 “Soft” factors such as raising awareness of Internet and information technology training are also important

for expanding universal access to Internet.

25

4. National absorption of Information Technology


This chapter explores the use of Infor-mation Technology in the government,business, education and health sectors.

4.1 GovernmentThe Nepalese government sees itselfas promoting, or directly using, infor-mation technologies in the followingways:

Government roles:

• To set national goals and pri-orities, and to develop policiesto achieve them;

• To develop human resources;• As an investor in R&D and

other IT-promoting ende-avours;

• To operate or regulate IT-pro-viding organizations;

• To enable and encourage theprivate sector;

• To provide content and stand-ards;

• To protect the public and na-tional interests.

Direct uses of IT in governance:

• To reach and deal with non-government constituencies;

• To support internal govern-ment transactions.

A summary of our findings in each ofthese categories follows.

4.1.1 Government roles

4.1.1.1To set national goals andpriorities, and to developpolicies to achieve them

For more than a year, the Governmentof Nepal has been in the process ofdeveloping a comprehensive set ofpolicies dealing with the informationtechnologies. Some of this is explicitin the Ninth Five Year Plan, but most isstill under development. Much of theeffort appears to be at the initiative ofthe National Planning Commission act-

ing for the Cabinet, with the Ministryof Science and Technology designatedas the lead line ministry. For telecom-munications more specifically, the lineagencies are the MoIC and the recentlyestablished regulatory agency, theNTA.

Two overarching national goals to beserved by encouraging the develop-ment and use of IT are: (1) the fur-ther development of several economicsectors; and (2) improving access andthe quality of life throughout the coun-try, and especially in the villages andrural areas, where almost 90 per centof the population resides. It is hopedthat IT will help develop both basicsectors for domestic consumption,e.g., agriculture and electric power, andalso help make these and other sec-tors, e.g., tourism and carpets, intomore effective export industries. Theplan also calls for the use of IT to im-prove the quality and range of gov-ernment functions and services to thepeople. A major constraint on theimplementation of the prospectiveforthcoming policies is that they shouldnot result in seriously draining the hardcurrency holdings of the government.

The Minister of Science and Technol-ogy (MoST) heads the National ITPolicy Committee with senior member-ship from several other governmentagencies, including the NPC, the Min-istry of Finance, Tribhuvan University,among others, and from the privatesector. This committee currently hassubcommittees doing policy-orientedstudies of the following subject areas:

• Telecommunications Infra-structure;

• Human Resources;• Software Industry;• The Internet (especially e-gov-

ernance, e-commerce, ruralaccess);

• Cyber Laws;• IT Parks.

26

Nepal Case Study

4.1.1.2 To develop humanresources

This subject is discussed under theEducation subsection below.

4.1.1.3 As an investor in R&Dand other IT-promotingendeavours

There has been essentially no gov-ernment support for IT-related R&Din Nepal. Most of what little that doestake place, e.g., some embryonicefforts at Tribhuvan University andpossibly elsewhere, is largely in theform of fairly rudimentary develop-ment by developed country stand-ards. The Ministry of Science andTechnology has recently contributed10 million rupees to the three majoruniversities in Nepal, and other fundsto the Royal Nepal Academy, butnone of this supports work in IT.However, the Ministry has stated anintention to support IT-related R&Din the future. There appeared to beno competitive funding mechanismfrom the government, although Ne-pal does get some R&D support inother areas from international agen-cies. Although it remains unclear howmuch the Ministry of Defence sup-ports R&D in IT, a few years ago, theNepali government announced thecreation of an IT Park, to be to belocated between Banepa andKhulikel. But, so far, almost nothinghas come of it. So far, no clear focusfor investment in R&D has emerged.

The government could participate asan investor in IT in other ways, rang-ing from major purchases of hard-ware and software for directgovernment use, to direct invest-ment or subsidy in selected IT ar-eas. As a prospective matter ofpolicy, the government has ex-pressed interest in investing in ITParks to develop a software indus-try, and perhaps a modest hardwareindustry producing inexpensiveInternet terminals. The governmentis also uniquely capable of spendinglarge quantities of rupees, especiallyin the rural areas. To date, as far asit is possible to tell, there have beenlittle of these kinds of investment.

4.1.1.4To operate or regulate orlicense IT-providing organiza-tions

This subject is covered in Sections 2and 3 above. However, it should benoted that the registration of .np do-main names is not handled by anygovernment agency. At present it is inthe hands of the MOS ISP. Serious con-sideration apparently is being given totransferring that function to a govern-ment agency or a neutral private party.

4.1.1.5To enable and encourage theprivate sector

The government continues to imposefairly high taxes on IT imports, to con-trol the disposition of significant hardcurrency earnings by the private sec-tor, and to support a monopoly tel-ecommunications operator. However,as discussed in Sections 2 and 3, thegovernment has loosened controls inseveral ways, and in particular madechanges that have resulted in the rapiddevelopment of a group of private ISPs.As discussed in Section 3, in compari-son with the controls of the past, theNTA is taking a progressive role in ena-bling private sector initiatives, espe-cially with regard to the Internet.

4.1.1.6To provide content andstandards

The MoIC runs the national TV and ra-dio stations and several newspapers.It provides or oversees much of theNepalese language content in thesemedia. Neither the MoIC nor any othergovernment agency does the samewith regard to the Internet. Most ofthe Nepal-related content on theInternet is in English and either gen-erated abroad or by domestic privatesources. In principle, the MoIC still hasresponsibility for policing illegal con-tent, but the need for this has so farrarely occurred with respect to theInternet (the best known of the fewcases involved the morphing of a pho-tograph of a popular actress).

Nepalese is spoken almost exclu-sively in Nepal, with the exceptionof some parts of India like Darjeeling,Assam and some parts of Bhutan. Itbears a strong relation to Hindi, both

27

languages are derived from Sanskrit,but differs in significant ways, e.g.,it has a different character set forthe numerical digits. As is the casewith other one-country languages forsmall countries (e.g., Hebrew, Viet-namese) the standardization of thecharacter set and some grammati-cal features, especially in de factoworld standard software products,does not come early or easily, andmuch of what is done is via patches.So far, the government has not takena strong role in bringing about aneffective standard.

4.1.1.7 To protect the publicand national interests

This usually takes the forms of lawsand regulations concerned with na-tional security, often interpretedbroadly to include forms of internalsecurity in developing countries,crime, and economic activities (e.g.,intellectual property). Although men-tioned on occasion, for example, withregard to Maoist guerrilla groups inwestern Nepal, national security con-siderations do not seem to play a se-rious and visible role in governmentcontrol. As noted earlier, the Minis-try of Information and Communica-tions theoretically enforces certainforms of censorship controls, e.g., onnegative coverage of the Royal Fam-ily, but there are apparently fewcases of this that are prosecuted. TheMoIC would work with the Home Min-istry for enforcement. The MoIC alsoassigns wireless frequencies to boththe military and civil users, appar-ently without much conflict.

There is a subcommittee of the Na-tional IT Policy Committee studyingcyber laws in India, Malaysia, andSingapore with the intent of work-ing out a suite of such laws suitablefor Nepal. Some of the issues beingconsidered are said to include dig-ital signature, computer crimes, andcontradictions with existing laws. Sofar, it appears that the subcommit-tee has not completed its work, andit was not possible to find out whatthey are likely to recommend.

4.1.2 Direct uses of IT in gov-ernance

4.1.2.1To reach and deal with non-government constituencies

Some Nepalese Government agencieshave simple web sites. Most apparentlydo not, as there are only 12 .gov.npdomain names registered as of Janu-ary 20, 2000 and the majority of thesedo not have associated web sites.Those that do have web sites includethe NPC and the national police. Thereseems to be no Internet presence forParliament and local government. How-ever, some government agencies main-tain web sites on .com servers,including Radio Nepal and the Ministryof Home Affairs.

Evidently, it is hard to know to whatextent these sites are used by theNepalese people, but one can assumethat they are not used extensivelysince only a small fraction of people inthe country have Internet accounts,and those were spoken with did notseem to use government web sites ex-tensively. Some Ministry Secretarieswho were contacted did not even knowif their ministries had web sites.

The government provides almost noon-line content or systems support forpublic use of the Internet in govern-ance-related subject areas such asnews, weather conditions, public meet-ings, agricultural commodity prices,legislation before Parliament, referencedata bases for legal codes, etc.

There is a subcommittee of the Na-tional IT Policy Committee concernedwith e-governance. At the time of thewriting of this report, their delibera-tions and recommendations had notbeen made public. The indication is thate-governance in the strong sense ofdirect reach to and feedback from citi-zens is a long way off because of thelimited supporting infrastructure forelectrification, education, and telecom-munications.

The two government agencies mostlikely to be most advanced in the useof IT for dealing with constituencies


28

Nepal Case Study

outside of the Nepalese governmentitself appear to be Civil Aviation, andthe Foreign Ministry. The Ministry ofTourism and Civil Aviation operates thecivil aviation infrastructure, and thuslikely operates information systemsthat must interface with all privatedomestic and foreign airlines. Appar-ently, the Foreign Ministry operates asecure network that connects all theNepalese diplomatic missions abroad,but there are no available details. It ispossible that such a network might beselectively used by Nepalese busi-nesses18 .

The Nepalese Government, throughthe NTC, has had a policy of promot-ing at least a minimal telephone pres-ence at the district and village level.While this is not necessarily for gov-ernment-citizen connections (govern-ment-government and citizen-citizenconversations are probably at least aslikely), it does represent an effort ofgovernment to get some telecom-munications to the remote areas ei-ther through Public Call Offices or viaa direct presence in government of-fices (see discussion in section 3.3.4).

It is difficult to tell if there are any spe-cific government agencies that are se-riously wired into specializedinternational networks.

4.1.2.2To support internal govern-ment transactions

Most ministries are very probably bet-ter equipped with telephones com-pared to the rest of Nepalese society,and most of these phones are used forcommunications internal to eachagency and for communications else-where within the government. Yet, itis difficult to tell whether telephonepresence declines through the govern-ment and national geographic hierar-chies (e.g., measured by distance fromKathmandu).

No government agency appears tobenefit from a packet-switchedIntranet that extends broadly withinthe agency and with an internationalgateway. The most likely agency tohave such a network would be the For-eign Ministry.

All available information indicates thatthe Ministry of Defence (MoD) doesnot have a visible presence that ei-ther supports a larger national net-work, or constrains communication, asfor example, the MoD does with itscontrol over wireless communicationsin India. If there are MoD controls overtelecommunications, they may be inthe remote and especially border ar-eas, as well as areas where Maoistguerrillas are active.

The Ministry of Science and Technol-ogy has a stated intention to provideInternet connectivity for much of theNepalese government. The networkwould extend down at least three lev-els in the government hierarchy: toministries, departments, and offices.

So far, the intention is for the Ministryto have a VSAT (they have had onesince November, but it was not opera-tional in mid-late January), and to pro-vide Internet connectivity via dial-up.More remote areas would be connectedvia radio modems, the Ministry intendsto run the network itself, using per-sonnel who until recently worked forprivate ISPs. No government agencywould be required to use this network,and all using agencies would be ex-pected to at least partially pay for theiruse. There is, at present, no specificplan to physically wire up an Intranetfor the huge government complex atSingh Durbar in Kathmandu.

At this time, it would seem that theMinistry intends to act as a minimalistgovernment ISP. There does not ap-pear to be a serious interest on thepart of the Ministry to provide otherservices, like web site construction,and no intent to build a network thatwould be secure enough and otherwisecapable of handling government-gov-ernment or government-business pro-curement. Nor are there any specificplans to promote use of IT by localgovernment.

4.2 Business

The use of the Internet by Nepalesebusiness is in early stages due to Ne-pal’s relatively late start on theInternet. In most nations, the Internet

29

was first established by small groupsof enthusiasts in the university andresearch community,19 but that wasnot the case in Nepal. Commercialorganizations led the way there, butthey were late. By the time that Nepa-lese companies began experimentingwith store and forward (UUCP) emailservice in 1994 and 1995, most othernations already had full IP connectiv-ity, commercial Web services were be-ing deployed,20 and an internationalconference had already convened onthe role of the Internet in tourism, animportant business in Nepal.21 As aresult of this late start, Nepal finds it-self with a relatively immature com-mercial Internet industry andpresence.

MOS is the oldest Nepalese ISP, andappears to be the leading business con-nectivity provider. They have between20 and 30 leased line customers androughly 80 per cent of their dial up ac-counts are businesses. MOS is also do-ing off-shore programming forBloomberg Financial Services, and isdeveloping an online retail mall, whichwill be integrated with back-endprocessing for ordering, inventory,fulfillment, etc. They also have a 10-person news-gathering organization,and produce <www.nepalnews.com>.This site has approximately 4’000 visi-tors per day, and is a potential sourceof revenue domestically and among theNepalese expatriate community (some80 per cent of the visitors to the siteare from North America).

Nepal’s late start with the Internet hasleft it with relatively little business ac-tivity. Table 4.1 summarizes the list-ings of tourism and export relatedcompanies in the Nepal Directory,which is available both as a hard copyYellow Pages and online.Even in theseexport-oriented industries, only 49%of the companies listed in the YellowPages have email addresses, and manyfewer have web sites.22 One problemis the sheer number of online directo-ries for Nepal. In fact there are somany, they have run out of originalnames (e.g., <www.catmando.com>).Most only list the organizations theyhost. It would be useful and reassur-ing to have an officially sanctioned

“Nepal web site” (like Singapore’s na-tional web site, Infomap <http://www.sg>). This is especially true forsites such as government agencies(again see The Singapore Governmentweb site at <http://www.gov.sg>).

Looking at the web sites that do exist,one sees further evidence of Nepal’slate start on the Internet. They arefirst generation web sites — small,static sites typical of the early “elec-tronic brochures” that were found onthe Web several years ago in all na-tions. They will evolve with time, butthey are dated. Dhukuti.com,<www.dhukuti.com>, is an improve-ment over most of these sites. It is aUS-hosted site selling books, music,handicrafts and booking travel andtrekking tours that was built with ta-ble-driven store package. It has thelook, shopping cart, credit card verifi-cation, and site evaluation feedbackthat US shoppers are familiar with to-day, and access in the target marketis fast because it is hosted in the US.Modern web sites are comprehensive,providing all the information and serv-ice a user requires. They are interac-tive, allowing the user to customize theexperience, retrieve material from andupdate databases, complete transac-tions and payments, arrange forfulfillment, etc. They gather informa-tion from users, leading to effectivecustomer relationship managementand the possibility of creating a com-munity among the users themselves.They also provide views of corporateinformation for and communicationwith suppliers, vendors and other busi-ness partners.

For example, a mature travel presencecould provide one-stop information forpotential visitors. It would gather valu-able data on visitors to the site, andprovide a customized experience fordifferent types of traveller (business,general tourist, Buddhist tourist, rug-ged trekking, mountain climbing, etc.)from different parts of the world. Thesystem would be comprehensive, cov-ering the travel experience from basicfamiliarity with options through visaapplication, airline reservations (inter-national and domestic)5 , ground trans-portation, hotels and lodging, guides,


30

Nepal Case Study

etc. The site would be interactive, al-lowing for online itinerary configura-tion, reservations, and payment. Thesite in such a system would be the tipof the iceberg; it would be well inte-grated with systems for fulfillment. Avisitor’s records and itinerary would beonline for access by the people respon-sible for meeting them at the airportthrough the people responsible fordropping them at the airport for de-parture. Equally important, the systemwould be database driven so provid-ers of services could maintain pricesand other information independently(it would not scale without such de-centralization). There would also bemechanism for assessment and evalu-ation of services, perhaps a combina-tion of association inspection andcustomer feedback. There would be fol-low-up with site visitors and commu-nity building for those who have visitedNepal, leading hopefully to a long runrelationship with these customers.

It is clear that such a system wouldrequire a significant effort, perhapsencouraged and coordinated by theNepal Tourism Board. It would alsorequire nationwide connectivity, per-haps focused on district capitals or air-ports (there are 44 airports in Nepal).Whether in tourism or other industries,Nepalese business should, and willbegin developing comprehensive,modern web sites.

4.3 E-commerce

Electronic commerce (e-commerce) isgrowing rapidly and fuelling invest-ment, productivity increases and eco-nomic growth. However, the vastmajority of that investment and returnhas taken place in developed nations,and the role and impact of e-commerceon developing nations is unclear. Onemust ask whether a developing nationcan afford to allocate scarce humanand economic resources to e-com-merce based on the hypothesis that itwill pay off.

There is reason to believe it will. Forexample, the World Bank found ratesof return between 13 and 20 per cent,averaging about 20 per cent, whenassessing telecommunication invest-

ments in developing nations.25 In ad-dition to return on investment, theyestimate a 15-30 per cent return tothe general economy. They also find“very large economic returns” from thetelecommunications components inother sectors such as railways, power,tourism, banking, and rural develop-ment. These returns were seen beforethe value of Internet-based e-com-merce was added to basic communi-cation investment. A recent report ofthe United Nations Conference onTrade and Development (UNCTAD)describes e-commerce progress in de-veloped and developing nations in anattempt to instil confidence in leadersand decision makers so they will actto gain experience in this area.26 Astudy of 74 garment manufacturingfirms in Delhi concluded that they“should adopt the latest informationtechnology tools available in the worldmarket.”27

Other scholars, for example, ErnestWilson, are less confident;28 however,no prudent government can ignore e-commerce. It would be wise to inves-tigate and gain experience rather thansit on the sideline waiting for the im-pact to become known with certainty.Practical suggestions for governmentsincluding spreading awareness of e-commerce, developing human re-sources (user, entre-preneurial andtechnical), developing local content,facilitation of financial services, plan-ning telecommunication infrastructure,encouragement of value-added tel-ecommunication services, facilitation ofonline payment, reducing costs ofequipment, and passing laws to facili-tate e-commerce are outlined byDessauer and Ismail.29 Many govern-ments, including that of neighbouringIndia, have mapped out active policiesand programmes in and in support ofe-commerce.

While the government of a developingnation should investigate and invest ine-commerce, it must do so in thecontext of its own goals and situation.In a developed nation, e-commercemight be viewed as a means toincreased industrial productivity orexport expansion. While these areimportant everywhere, a developing

31


Table 4.1: Comparison of printed and online version of Nepal Directory

Source: Nepal Business Directory 1999/2000 <http:www.nepaldirectory.com>.

By selected listing category

Print (Kathmandu) Online (National)

Listing Category Nbr. Email % Web Nbr. Email % Web

Cargo Clearing & Forwarding 156 94 60% 0 30 25 83% 0

Exporter & Importer 363 120 33% 0 11 8 73% 1

Airline 65 26 40% 3 57 22 39% 0

Hotel24 300 136 45% 7 21 20 95% 1

Travel Agency 387 216 56% 1 32 27 84% 1

Trekking 295 195 66% 3 41 31 76% 2

Total 1’410 693 49% 14 162 108 67% 5

nation might be more concerned withstemming population flight from ruralto urban areas by increasing villageproductivity to the point where itaffords two rather than one meal perday or providing access to news,entertainment, and education. TheNepalese goals of increased social andgeographic equity and rural employ-ment should be considered along witheconomic considerations in e-commerce decision-making. Theremainder of this section will examinevarious ways of viewing andcategorizing e-commerce, withcomments on the Nepalese context,and conclude with brief discussions ofprojects that might be undertaken.

4.3.1 Views of E-commerceLike the proverbial blind men and theelephant, there are many ways to de-fine and categorize e-commerce.Rather than attempt a single,orthogonal taxonomy, one must lookat the e-commerce “elephant” in sev-eral, overlapping ways, discussing in-formation products, electronicmarkets, vertical industry portals,extranets, business-consumer sys-tems, and e-commerce involving gov-ernment.

Information ProductsInformation products are unique in thatselection, transaction, payment andfulfilment may be completed electroni-

cally without involving physical infra-structure for warehousing and deliv-ery. Information products would seemattractive in a developing nation likeNepal, where roads, transport, postand delivery facilities are poor. On theother hand, the banking and legal sys-tem must provide for electronic pay-ment, and, of course electrical andtelecommunication infrastructure mustbe available and reliable.

In considering information products forexport, one should ask what is uniquelyNepalese. What news, literature, mu-sic, images, and video content wouldhave a market? Who would be the au-dience? Nepalese expatriates? Eng-lish and Hindi speaking Indians? Ane-commerce presence could perhapsevolve out of a government sponsoredNepalese culture site on the Internet.

Software and data entry are anotherform of information product. This cantake several forms.30 At the low endremains the relatively unskilled tran-scription and data entry. More highlyskilled content creation, for example,drawing for animation, the creation ofweb sites, or the operation of remotecall centres are also possible. Con-tract programming, in which a pro-grammer either works at the client siteor works remotely communicating overthe Internet, is common practice aswell. Each of these examples entails

32

Nepal Case Study

selling people’s time, but softwareproducts like a vertical system for anindustry or application or other pack-aged software can also be exported.India has made notable progress inthis area but they have spent manyyears developing skills and businesspartnerships. Only two such relation-ships were found, MOS’ work forBloomlberg Financial Services andwork on Pilgrim Software’s Quality andManufacturing Integrated System byPilgrim Asia, <www.pilgrimusa.com/asia_rd.htm>.

Of course the Internet merely ena-bles or facilitates such activity –management, marketing and humancapital are at its core. The marketsfor this sort of service are very com-petitive and crowded, making differ-entiation difficult. One strategy is tofocus effort on areas of current com-petence. For example, Chilean bank-ing and forestry software wassuccessfully exported because theyhad developed excellent local systems,and Nepal may have expertise in otherareas, for example, in systems forelectrical power generation and dis-tribution.

There would also be a domestic mar-ket for information products if therewere infrastructure in place to deliverthem. Information products involvingcredit, education, news, health, en-tertainment, and personal communi-cation can be sold in rural and in urbanareas if people have access to a net-work connection or a telecentre. Forexamples of a number of demons-tration projects, see the Rural Appli-cations Focus Group of theInternational Telecommunication Un-ion, <www7.itu.int/itudfg7> and theTelelac project in Latin America,<www.tele-centros.org>. While manyprojects are in the pilot phase, thetechnology to support such applica-tions is improving rapidly.

Funds transfer is another informationservice. The Internet is increasinglyused by expatriates in developed na-tions to maintain contact with eachother and with their families. Expatri-ates often send funds or funds to pur-chase gifts home, and a trustworthy

mechanism for electronic funds trans-fer should be provided. The same serv-ice is needed to support exportbusiness. This should not be seen as aprofit opportunity for the government,but as a method of getting hard cur-rency and enhancing quality of life.31

Electronic Markets

Electronic markets have flourished onthe Internet, and can take severalforms. Electronic auctions were de-vised for consumer transactions butthey are increasingly used by businesswhen companies have surplus itemsto liquidate. The tender model, inwhich a consumer requests bids for agood or service is common practicewith government procurement, andhas also been used on the Internet.Other sites allow buyers to make of-fers for goods and services. In thecase of fungible, homogeneous prod-ucts like grain or securities an elec-tronic exchange can allow immediateconsummation of transactions at thencurrent prices. If electronic marketsare not established by private com-panies, the government can take arole by procuring their establishmentor encouraging or subsidizing theirestablishment by private firms. Thegovernment would generally not beinvolved in control or operation of themarket site, but in planning, initial fi-nancing, monitoring quality, etc.

Electronic markets are well suited tohomogeneous, fungible commodities,several of which come to mind in theNepalese context: electric power, agri-cultural inputs, products, and transpor-tation, and handicraft raw materials.

Nepal has knowledge of energy mar-kets because of its hydroelectric powerindustry. We are seeing the emergenceof electronic markets for energy, forexample, Altranet (<www.altranet.com>), in developed nations today,and Forrester Research predicts that17 per cent of US electricity will betraded online by 2004.32 Is there aplace for an international electronicmarket for energy in the region? Or,more generically, how can the Internetbe used in service of the region’s en-ergy suppliers?

33

Perhaps electronic markets could playa role in rural agriculture by loweringthe cost of seed and fertilizer, helpingfarmers find the best prices for theirgoods, and finding cheap, reliabletransportation to markets. An earlystudy along these lines in Pondicherry,India, found that information aboutsomething as mundane as bus sched-ules and the availability of space on abus can be quite valuable in the ruraleconomy.33 One can imagine a Nepa-lese “Federal Express”, which uses in-formation about produce that is readyto go to market in order to aggregategoods for transportation to marketplaces. This would reduce the burdenof travel to the market with one’sgoods.

Handicrafts are also significant in Ne-pal’s rural economy, employing an es-timated 300’000 people throughout thecountry.34 In urban areas, people usu-ally work full time in handicrafts,whereas it is typically a subsidiary oc-cupation in rural areas. While the con-tribution of handicraft exports to GDPis only 0.89 per cent (1996/7), it hasgrown steadily from 0.08 per cent in1986/7, and handicrafts accounted for4.17 per cent of exports in 1996/7.Might electronic markets for handicraftraw materials and products increaseefficiency? As with electric power, thesemarkets could serve the entire region,not only Nepal.

Vertical Industry Portals

In electronic marketplaces, the website performs the role of a broker,bringing a buyer and seller togetherat a given price, and providing themechanism for consummating a trans-action. Another possibility is the verti-cal portal, a site, which describes andindexes the vendors of a given goodor service, and provides links to themfor interested customers. The trans-action is then negotiated independentof the electronic marketplace. As withelectronic marketplaces, the govern-ment can encourage the establishmentof vertical portals if private industrydoes not do so. Again, it is not sug-gested that the government shouldoperate and control the site, but sim-ply facilitateing its creation, wherebyresponsibility for content would be

decentralized, and the organizationsoffering goods and services would pro-vide and maintain their own material.35

The tourism and trekking industry is acandidate for a vertical portal. The website should be comprehensive, provid-ing for selection of transportation toand within Nepal, accommodations,guides, etc. The site would providedescriptions, search and selectiontools, and links to competing compa-nies in each of these areas, necessi-tating the participation of representa-tives of several industries. As with moste-commerce, the web site would beonly the tip of the iceberg. Paymentand fulfilment must also be providedfor. Credit cards are the most commonpayment mechanism for consumergoods on the Internet today, and ameans of accepting credit card pay-ment would be necessary. Similarly,systems for international travel, visaand immigration matters, local trans-portation, and housing would all haveto be integrated.

The Handicraft Association of Nepal hasthe beginning of a vertical portal at<www.nepalhandicraft.com.np>. Thissite has links to twelve member homepages and an email ombudsman serv-ice to match suppliers with foreign dis-tributors, but the site is disappointing.The most important feature to a pro-spective retailer is the ombudsmanservice, which, inexcusably, leads to abroken link. There is very little back-ground information, and what is thereis graphically unattractive and the textis in poor English. Like a consumer-oriented travel portal, such a site mustbe comprehensive. It should provideextensive background material onproducts, terms, customs procedures,shipping and warehousing options,sales volumes, etc. As with other prod-ucts and markets, a vertical portalcould serve the region, not just Nepal.For example, one could focus onThangka painting, and provide a com-prehensive portal for organizationsproducing them throughout the world.

Extranets

Electronic marketplaces and verticalportals are open, hoping to attract allbuyers and sellers, but the Internet is


34

Nepal Case Study

also used to create closed “extranets”to facilitate communication and coop-eration between relatively stable busi-ness partners. For example, thehandicraft industry involves raw ma-terial producers, individual artisans,producer and craft-based organiza-tions, marketing and fair-trade organi-zations, commercial buyers andimporters, government customs andexport regulators, retail outlets, andwarehousing and transportation atevery step in the process. Simply con-necting the appropriate people in eachof these organizations with email wouldno doubt increase production and lo-gistic efficiency. Providing them withweb sites for querying inventory sta-tus, ordering, scheduling, trackingshipments, etc. would provide stillgreater returns.

Business to Consumer

With the exception of tourism, we havefocused on business to business (B2B)e-commerce. The domestic consumermarket is limited by the number ofInternet users in Nepal and their con-centration in Kathmandu. It will besome time before the domestic con-sumer market is large enough to sup-port business to consumer (B2C)e-commerce; however, entrepreneurslike Mercantile are already consider-ing entry. Their task will be simplifiedby most delivery being in Kathmanduand other urban areas.

Direct Internet sales to export custom-ers are difficult because of logisticalproblems with rapid, reliable delivery;however, the inefficiencies and mark-ups in the current distribution chan-nels make direct marketing anattractive goal. For example, a Dhakafull pattern shawl begins with Rs 175for yarn and Rs 275 for the producer’slabour, and ultimately sells forRs 5’250.36 An allo placemat, whichsells for Rs 300 begins with Rs 15 formaterial and 7 for labour. Note thatthe bulk of the export mark-up is infreight, duty and retail. The Rs 5’250shawl sells for only Rs 750 domesti-cally and the placemat 48.50.

Direct marketing to consumers wouldentail a web site, and it should be com-

plete and professional, enabling theconsumer to select or design, order,pay for and track delivery of an item.Timely delivery to customers wouldentail warehousing and fulfillment cen-tres in target market areas such asNorth America, Europe and Australia.37

Government cooperation in streamlin-ing export procedures and loweringduties would also be necessary.

If analysis shows the logistics of directdistribution are economically advanta-geous, there is still the strategic prob-lem of handling channel conflicts. Ifdirect sales are significant, they willweaken and antagonize current distri-bution and retail partners. This is acommon problem—the same thinghappens when a handicraft producersells directly to a marketing organiza-tion or retail outlet, bypassing the lo-cal producer’s cooperative or when anautomobile manufacturer sells directlyto a customer, bypassing the retaildealer. Logistics and channel conflictsare formidable hurdles, but the cost ofthe current distribution system mightprovide sufficient incentive to over-come them.

It should be noted that a valuable by-product of all forms of e-commerce,especially business to consumer, is theopportunity for establishing and main-taining a customer relationship. We seefirms in developed nations literally pay-ing people to become customers on thetheory that it is important to build abrand presence and that it is cheaperto keep an old customer than to at-tract a new one in a mature market.As such, one of the key functions of aweb site is to gather data on visitorsfor subsequent communication, serv-ice and marketing. This should be doneunobtrusively, with guarantees of pri-vacy, and always for a purpose or inreturn for something. It is also neces-sary to integrate Web data with datagathered by other means. For exam-ple, records generated by a tourist andinformation gathered during a visit toa tourism web site should be inte-grated.

While this is easily achieved throughdirect business-consumer e-commercesites, it is not the only possibility. Many

35

manufacturers register customers whoare sold and serviced through distri-bution channels, and this could be donefor expensive goods such as jewelleryand pashmina garments as well.

E-commerce Involving Government

Both local and national governmentsare also involved in commercial trans-actions, and the government has anopportunity to lead by example in thisarea. The Internet can be used in thetender and fulfilment process, projectmanagement and reporting, in collec-tions and procedures, etc. These canbe both government-business andgovernment-consumer transactions,and there are many examples to fol-low, for example, in local governmentin India38 or at the national level inthe US or Singapore.

4.3.2 Possible actions

The following suggestions are threepossibilities for some concrete e-com-merce projects: implement a con-sumer-facing e-commerce pilotproject, convene a series of e-com-merce workshops, or conduct a villagenetworking pilot study.

Handicraft E-commerce Pilot Project

This project would market thangkapaintings via the Internet. It would gen-erate hard currency and employment,with the possibility of converting somerural labour from supplemental to full-time work. Thangka paintings were se-lected because the cost and difficulty ofshipping them is fairly low relative totheir value, they have a long shelf lifeand present an opportunity forcustomization. They would have a mar-ket as art, decoration or as religiousobjects, and this diversity provides adegree of stability. Pashmina shawls orgarments also share these characteris-tics, but that is a larger, more volatileindustry, hence less suitable for a pilotproject.

Savings from reduced distribution andretailing cost would be used to directlybenefit the producers by paying overthe usual rate, while demanding high qual-ity. Another alternative would be to givethe producers an equity stake in the en-terprise via Grameen-style micro finance.

There would have to be a purchas-ing or screening agent in Nepal toinsure quality and coordinate logis-tics. Uniformly high quality would becritical.

Internet customers should be able toselect/design paintings or specifycharacteristics they are looking forand get suggestions. The site shouldalso provide educational material onthe meaning and assessment ofthangka paintings and the culturesurrounding them. There should beframed and unframed options, witha selection of frames on the site.Custom framing should also be avail-able. Payment would be via creditcard.

Development of the web site and itsmarketing plan should be done with alocal-market partner with skill in Webdesign and marketing. This could ei-ther be on a profit making basis ornot-for-profit through a university orother non-profit.

Timely, accurate fulfilment of orderswould be critical, requiring shippingfrom warehouses in local market ar-eas. Delays due to export bureaucracywould have to be eliminated, and afast, reliable mechanism for transfer-ring payment from the market area toNepal would be needed. Since the larg-est export market area for handicraftis North America,39 and English is usedin the United Kingdom and Australia,the United States would seem to be areasonable location for initial distribu-tion with English the initial web sitelanguage.

Vertically Focused E-commerceWorkshops

The government could convene a se-ries of workshops bringing togethermembers of the Nepalese IT commu-nity and members in industries, whichmay be likely e-commerce candidates.The goal here would be to educate bothcommunities, leading to innovation andconcrete action. Candidate industrieswould be tourism, electric power andhandicrafts. (The latter could be fur-ther focused on, for example,pashmina raw material or finishedgoods).


36

Nepal Case Study

Each workshop would be comprehen-sive. For example, a handicraft work-shop would include representatives ofraw material, producing, marketing,retail and export organizations. Thegoal would be interchange of informa-tion between the IT and other indus-try attendees followed by preliminarydesign of e-commerce systems. Theworkshops would focus on developingconcrete plans for increasing efficiencyvia extranets, electronic markets andvertical portals. The workshops couldbe tied to government funding as well,in that the best preliminary designswould receive seed funding.

“Village Connectivity” Pilot Project

Village connectivity projects areunderway in many nations, and givenits social goals and growing urbanpopulation, Nepal would benefit fromexperience in this area The projectcould be funded from the telephonerural development fund. Such a projectwould provide practical experience withe-commerce technology and applica-tions in rural areas, and would hold thepromise of improving quality of life anddiscouraging movement to urban areas.

Prior to embarking on such a project,there should be a survey of similarprojects and available technology.There is considerable relevant experi-ence and information nearby in India.

4.4 Education

For the education sector,40 use of theInternet is embryonic at best, and thisin only a few places. It is almost non-existent in the great majority of edu-cational institutions. Only 27 of the 400.np domain names registered in Janu-ary 2000 were .edu.np. A good por-tion of these were not operational orwere not actually educational institu-tions (although individual educatorsand some educational institutions haveInternet access via non-.edu.np sites).The educational sector has been muchmore of a follower than a leader in es-tablishing the Internet in Nepal.

4.4.1 Primary and SecondarySchools

There is almost no presence of theInternet in the public elementary and

secondary schools of Nepal. Somecomputer training takes place in a verysmall number of private schools atthese levels, and some even have theirown edu.np domain names (e.g.,bhanusecondary, britishschool), butthese cater largely to foreigners, theEnglish-speaking and the wealthy.

4.4.2 The Universities

Tribhuvan University (TU) (<http://www.panasia.org.sg/nepalnet/educa-tion/Tri_university.htm>) system is byfar the largest tertiary education en-tity in Nepal. It is an extensive na-tional system with 61 constituent and157 private affi l iated campusesaround the country41 . Approximately150’000 students are enrolled, al-though perhaps 50 per cent nevergraduate.

The only parts of TU to offer seriouseducation in IT are three of the nineinstitutes. These include the Instituteof Engineering (IoE), the Institute ofScience and Technology, and the Fac-ulty of Management. These areheadquartered in Kathmandu, withbranches at a small number of othercampuses. The IoE has establishedbaccalaureate programmes in Compu-ter Engineering and Electrical Engi-neering, and the Institute of Scienceand Technology has one in ComputerScience. The two explicit “Computer”programmes were created only withinthe last 2-3 years. Each of the threeprogrammes is graduating 20-50 stu-dents per year. The Faculty of Manage-ment does not have a ManagementInformation Systems (MIS) degree pro-gram, but teaches about a half dozenMIS courses as components of otherbusiness programmes, including a Mas-ters of Business Administration (MBA).All three faculties plan on creating ad-ditional IT-related degree programmesat several levels, including two Mastersprogrammes in Engineering and a PhDprogram in Computer Science. However,as things now stand, the TU under-graduate degrees appear to be at thelevel of 2-year associate degrees in theUnited States or the equivalent of 2-years of study at a British university.

The IoE has recently established a Cen-tre for Information Technology at its

37

campus near UNDP in Kathmandu. Thisis likely the most technically advancedcomputer network facility in Nepal. Theyhave a VSAT running with a 64k uplinkand 128k downlink to ThaiCom. ThisVSAT is under the Ministry of Environ-ment and Physical Planning, but IOE hasits own application pending with NTA.It is their initial intent to connect ap-proximately 400 machines in nine build-ings, each with its own hub. They thenhope to expand their network to all fourIOE campuses and eventually to all ofTU. There is some thought of eventu-ally also providing networks to parts ofthe government.

All three programmes are extremelylimited in faculty, with only two profes-sors each in Engineering and Compu-ter Science, and none in Management.The three faculties have a total of threereaders (approximately associate pro-fessor equivalents) between them. Thegreat majority of classes are taught bylecturers and instructors. It is difficultto find, hire, and retain faculty. Thereare no salary differentials by field at TU,and salaries are very low. Teaching loadsare heavy and the TU bureaucracysometimes difficult. Faculty are forcedto moonlight on better paying jobs. TUis minimally competitive in attractingand retaining Nepalese who have ob-tained advanced IT degrees fromabroad.

TU also suffers from severe shortagesof computer equipment. No campus


Table 4.2: Schools in Nepal, 1996

Source: UNDP Nepal (<http://www.undp.org.np/keydoc/nprofile/education.htm>).

Schools Teachers and Students Distribution

Students Teachers Stud./ Stud./ Avg.Type of No. of Sch. Teach Classschool schools Total Female Total Trained Ratio Ratio size

Primary 22’218 3’447’607 1’401’346 89’378 39’980 155 39 31

Low. Secondary 5’506 791’502 300’807 19’704 6’204 144 40 48

Secondary 2’903 329’833 119’102 16’423 7’328 114 20 57

Total 22’372 4’568’942 1’821’255 125’505 52’512 204 36 36

has enough machines. At many cam-puses, very few students have anyaccess. The Faculty of Managementhas Information Systems labs at a halfdozen branch campuses, with roughlyten personal computers at each. Withfew exceptions, the academic comput-ers at TU are not networked in anyway. The major exception is the IOECentre for Information Technology.Much of the equipment was providedby a World Bank loan. They also havefunding from the Canadian Interna-tional Development Agency.

Some computer courses are offeredto students in other disciplines at TU,primarily at the main campus atKirtipur. The TU administration atKirtipur also has a small LAN, but it isnot clear if it is extensively used, andit apparently does not have anInternet gateway since none of themost senior administrators have an e-mail address on this network. TheHealthNet project is under the TU In-stitute of Medicine (see the sectionbelow on the Health Sector).

At least two other universities havecollege-level IT programmes.Kathmandu University (<http://www.panasia.org.sg/nepalnet/ku/home.htm>) (the School of Manage-ment also has a web site: <http://www.kusom.edu.np>) may be gradu-ating 40 students annually. Severalpeople believe that Kathmandu Uni-versity has the best tertiary degree

38

Nepal Case Study

programmes in IT in the country, andoffers the only under-graduate pro-grammes that provide more than theequivalent of a 2-year US communitycollege degree. The KathmanduSchool of Management is said to offera good MIS program within their MBA.Purbancha University is said to begraduating approximately 120 stu-dents per year on two campuses.They also have a practical program toproduce mid-level software engineers.The program is growing quickly (theyaccept anyone with a 10+2) and easierto get into than TU.

4.4.3 Vocational Training Insti-tutes

It is likely that most of the practicaltraining in IT is provided by about600 private vocational institutions.These are seen in many parts ofKathmandu, and to a lesser extent inPokhara, Biratnager and Birgunj andtheir environs. They range from verysmall store-front outfits to largeschools like the College of SoftwareEngineering (CSE). CSE claims tograduate 1’000 students per year,mostly from a 2-year Diploma pro-gramme. Altogether, these private

schools are said to train 15’000 peo-ple per year. Much of this is in the useof established software products sucha Microsoft Office. Increasingly, theWeb and Internet are becoming partsof these curricula, and perhaps 40-50% of the schools have or are ac-quiring Internet access. There is someparallel between these schools andthose that teach English, and we sus-pect a strong correlation between Eng-lish and the teaching of IT-relatedskills.

The Indian-based NIIT (<http://www.niit.com/index.shtml>) is one ofthe most advanced of the private vo-cational training institutions in Nepal.It uses a curriculum developed by oneof the most dynamic educational in-stitutions in South Asia, which now op-erates in 15 countries. NIIT offers arespectable range of technically sub-stantive, university-calibre, coursesin Kathmandu. Networking appearsto be given more emphasis here thanat the universities, and they offercontemporary web developmentcourses. Aptech and perhaps a fewother Indian educational organiza-tions are also providing some IT in-struction in Nepal.

Table 4.3: Schools with web sites, January 2000

Note: Only schools using the edu.np domain name.Source: ITU.

School Comment Web site

Shree Bhanu Secondary There is a home page, <http://bhanusecondary.edu.np/>School, Bandipur but no links were working.

Graded English Medium All links working except <http://www.gems.edu.np/>School one (out of eight).

Lotus Eyes International One descriptive page, <http://www.nepal.edu.np/>School no links.

Nepal Medical College Nine out of twelve links <http://www.nmc.edu.np/>working.

Nepalgunj Medical College All links working, including <http://www.ngmc.edu.np/>campus is located an online admission form.at Chisapani

Nepal Engineering College All links working, including <http://www.nepeng.edu.np/>printable application forms.

Kathmandu University All links working. <http://www.kusom.edu.np/>School of Management

39

The most visible active computer us-ers in Nepal are seen at registrationdesks at hotels, and similar places. Itmay be that much of the basic train-ing for such use is provided in house,or by the vendors of the systems.

4.4.4 Training Abroad

As is the case for many less devel-oped countries, many of the “best andbrightest” people go abroad for theireducation. One estimate is thatroughly 100 Nepalese receive bach-elor’s degrees from India, Russia, theUnited States and the Philippines an-nually. Perhaps a similar number re-ceive advanced degrees each year.More of these people go to India thanany other country. The reasons are acombination of proximity, language,cost, and admissions. We suspect thatthe majority of those who studyabroad try to pursue technical sub-jects, but we do not know what frac-tion are pursuing the study of theinformation technologies.

As might be expected, many of thosewho study abroad, especially in theWest, are able to get better jobs therethan they could get in Nepal. Many whoreturn apparently do so either becausethey do not complete their studies, orbecause of family obligations. However,most who do remain abroad seem toretain very positive thoughts abouttheir home country, and seem to wantto help out back home.

Many of the most active people whomwe met in Nepal were either at leastpartially educated abroad, or had spentconsiderable time there.

4.4.5 Effective absorption ofeducated people into thesociety/economy

There are apparently more educatedpeople looking for good jobs in Nepalthan there are jobs for them. IT-re-lated jobs in the private sector wereoften said to attract large numbers ofapplicants. We suspect that many ofthe applicants are under-qualified forthe best jobs. Senior administrators atTU expressed concern that the gov-ernment and private sectors were not

generating enough jobs to absorb eventheir fairly modest numbers of ITgraduates. These senior educators didnot have much of a concept of IT-edu-cated people creating their own jobs.

Many of the graduates of the privatevocational institutions take clerical oroperator jobs at government, NGO,and private organizations. Some seekjobs abroad on the basis of their tech-nical skills. For example, CSE claims“several” graduates who have securedjobs in the West. But we suspect thesenumbers are low, and that most Nepa-lese who have IT-related jobs abroadreceived some training there.

4.5 Health

The general state of health care inNepal is poor.42 Although most healthindicators have significantly improvedin recent years, Nepal still has a longway to go even to reach regional norms(Table 4.4). Furthermore, there areextreme variations within Nepal. Forexample, average life expectancy was55.8 years in 1996, but it was only 36years in the Mugu District and 67 inKathmandu, and the standard devia-tion in life expectancy among districtswas 6.2 years.

Table 4.5 shows Nepalese health re-sources. While we did not conduct anexhaustive survey, we were unable todiscover many networked applications.We found one hospital, the teachinghospital of the Nepal Medical Collegewith a LAN, but that appears to be anexception.43 Given the difficulty oftravel and communication within Ne-pal, even basic connectivity would havea significant marginal impact. If, forexample, all physicians (particularlythose outside of Kathmandu) hadInternet accounts or all Health Postshad email access, what would be theapplications and benefits?

The one organization, which seems tobe actively pursuing network connec-tivity in Nepal is HealthNet,<www.healthnet.org.np>, and wewere quite impressed by what theyhave been able to achieve with limitedresources. HealthNet began network-ing in December 1994 with a FidoNet


40

Nepal Case Study

link to SatelLife,44 <www.healthnet.org>, in Watertown, Massachusetts.Today they are an ISP serving themedical community with ten modemsand a 38.8 kb/s radio link to Mercan-tile Office Systems. They provide ap-proximately 500 users in 134organizations with the following serv-ices:45

• e-mail• list service• Usenet News (from the Network

Startup Resources Center in Or-egon)

• FTP service• threaded discussions• Nepalese health statistics• Nepalese Health Science Bibliog-

raphy• Nepalese Masters and PhD Theses• Full text of Nepalese reports and

journal articles• email access to Medline and

Popline• email Web access• distance education in the use of

computers in health statistics andlibrary and information retrieval

• abstracts of articles in the journalsin their library (hard copy requestsare fulfilled by FAX).

HealthNet is digitizing its library col-lection for online access, and hopes todo the same for the Nepalese mentalhealth and orthopedic associations aswell. HealthNet charges Rs. 6’000 permonth, and the Programme Officer,Dr. Pradhan, feels many physicians use

the Internet for personal business likestaying in contact with children study-ing abroad as well as professional busi-ness.

Outside of Kathmandu, much medicalpractice is traditional, though a physi-cian is posted to each District Office.They have some information for tradi-tional practitioners on their server, andcharge half their normal rate for ac-cess outside of Kathmandu. Between25-50 per cent of their users are out-side of Kathmandu.

Tribhuvan University graduates ap-proximately 30 physicians per year,and they are HealthNet users. Theyhave a 15-workstation LAN, and willsoon add 20-25 more in an adjacentbuilding. They would like to install aLAN in a nearby hospital as well. (Twohospitals are developing systems forcomputerized medical records). Alto-gether there are four medical schoolsand one dental school in theKathmandu area and six other medi-cal colleges in the nation. Four of theseare HealthNet users.

Water contamination is a severe prob-lem in Nepal, and they therefore haveexpertise in communicable water-borne diseases. Because of heavy re-liance on wood for heat and cooking,Nepal also has expertise in respiratorydiseases. The prevalence of tropicaldiseases such as malaria has also giventhem the incentive to develop researchand therapeutic expertise in this area

Table 4.4: Selected regional health indicators

Source: UNDP Human Development Report, 1999.

Infant Mortality Life Expectancy Doctors per 100’000 Nurses per 100’000per 1,000 births at Birth (1997) People (1993) People (1993)

Nepal 75 57.3 5 5

Bangladesh 81 58.1 18 5

Bhutan 87 60.7 20 6

China 38 69.8 115 88

India 71 62.6 48 n.a.

Pakistan 95 64.0 52 32

Sri Lanka 17 73.1 23 112

41


Table 4.5: Nepalese health resources

Source: Healthnet Statistics Nepal, <http://www.healthnet.org.np/healthstat/healthstat99.pdf>.

Per cent With:

Number e-mail Web Leased LANline

Ministry of Health 1 1 No No No

Department of Health Services 1 No No No No

Central Hospitals 5 1 No No No

Regional Health Service Directorates 5 No No No No

Zonal Hospitals 11 No No No No

Primary Health Centres 120 No No No No

Health Post 736 No No No No

Sub-Health Post 3’187 No No No No

Hospitals 83 10 No No No

Physicians 923 200 3 No No

Staff Nurses 3’925 5 No No No

Public Health Nurses 66 No No No No

Auxilliary Nurses 1’496 No No No No

Kavirajs 309 No No No No

Vaidyas 247

Health assistants 5’295

AHWS 3’190

Village Health Workers 4’015

as well. This expertise could be madeavailable to others on the Internet, andHealthNet has a project to put the fulltext of Nepalese medical journals online.

Initially, HealthNet was heavily de-pendent upon SatelLife, but it is nowapproaching financial self sufficiency.It has four paid staff members, andpays Rs. 40,000 per month for the linkto Mercantile. HealthNet is located inthe Health Learning Materials Centreof the Institute of Medicine at Tribhuvan

University, and the University pays aportion of Dr. Pradhan’s salary and pro-vides office space. Dr. Pradhan hasproposed expansion, including a newserver, router, and faster link to Mer-cantile. This would enable HealthNetto expand service to Nepal’s roughly1,800 doctors, nursing homes, andmedical colleges. He would also liketo offer service to the general NGOcommunity, estimated at 8,000 orga-nizations, and feels this expanded ISPcould be financially self sufficient.

42

Nepal Case Study

18 As an illustration of this, to get a copy of a visa application form for Nepal on the Web, one currently has togo to a UNDP site.

19 Goodman, S., Press, L., Ruth, S., and Rutkowski, A., “The Global Diffusion of the Internet: Patterns andProblems,” Communications of the ACM, Vol 37, No 8, pp 27-31, August, 1994 and Press, L., “WillCommercial Networks Prevail in Developing Nations?,” OnTheInternet, Vol. 3, No. 2, March/April, 1997, pp40-41.

20 Press, L., “Commercialization of the Internet,” Communications of the ACM, Vol 37, No 11, pp 17-21,November, 1994.

21 Press, L., “The Internet and the Travel Industry,” Proceedings of ENTER ’95, Innsbruck Austria, January 18-20, 1995. This conference was followed by the founding of a journal, with many of the participants asmembers of the editorial staff.

22 The two directories do not appear to reflect an integrated database in that all print listings are not online.23 Nepal has very few roads, making domestic airlines an important part of the tourist industry.24 The Ministry of Tourism licenses roughly 650 hotels nationwide.25 Saunders, Robert J, Warford, Jeremy J., and Wellenius, Bjorn, Telecommunications and Economic

Development, pg. 15-16, The Johns Hopkins University Press, Baltimore, 1994.26 Lanvin, Bruno and the UNCTAD staff, Building Confidence: Electronic Commerce and Development, United

Nations Conference on Trade and Development, <http://www.unctad.org/ecommerce/>.27 Lal, K. Information Technology and Exports: A Case Study of Indian Garments Manufacturing Enterprises,

Center for Development Research, University of Bonn, August 1999,<http://www.zef.de/zef_englisch/f_publ.html>.

28 Wilson, Ernest, Meeting the Challenges of Internet Inequality, OnTheInternet, pp 26-30, Vol. 5 No. 6,November/December, 1999.

29 Dessauer, Mark and Ismail, Magda, E-Commerce in the Developing World: Plug and Play?, OnTheInternet,November-December, 1999, pp 19-25, 38-39.

30 Press, Larry, Personal Computers and the World Software Market, Communications of the Association forComputing Machinery, February, 1991. Reprinted in Schellenberg, Kathryn, “Computers in Society,” 4th Ed.,Dushkin Publishing Group, Guilford, CT, 1991. Press, Larry, Software Export from Developing Nations,” IEEEComputer, December, 1993.

31 The value of increased connectivity with the Nepalese expatriate community should also be considered inassessing the decision to regulate Internet telephony.

32 Kafka, Steven J., Temkn, Bruce D., Sanders, Mathew R., Sharrad, Jeremy and Brown, Tobias O,eMarketplaces Boost B2B Trade, Forrester Research, February, 2000.

33 Press, Larry, A Client-Centered Networking Project in Rural India, OnTheInternet, pp 36-38, January/February, 1999, <http://som.csudh.edu/fac/lpress/devnat/nations/india/pondyoti.htm>.

34 Shahi, Surendra and Kachhipati, Chandra Prasad, Collective Marketing: The Case of Handicraft in Nepal,International Centre for Integrated Mountain Development, Kathmandu, 1999.

35 Information presented at the site would come from databases, and the vendors would update their portionsof those databases via protected Web interfaces. This database driven, multiple-access approach should beused on all web sites.

36 Shahi, Surendra and Kachhipati, Chandra Prasad, Collective Marketing: The Case of Handicraft in Nepal,International Centre for Integrated Mountain Development, Kathmandu, 1999.

37 The numbers of Internet users in India and China growing rapidly, and more direct shipment may be feasiblefor reaching those markets.

38 Press, Larry, Burkhart, Grey, Goodman, Sy, Mehta, Arun and Mittal, Arun, The Role of State Government inDeveloping India’s Internet, OnTheInternet, pp 35-37, November/December, 1998,<http://som.csudh.edu/fac/lpress/devnat/nations/india/otigovt.htm>.

39 Shahi, Surendra and Kachhipati, Chandra Prasad, Collective Marketing: The Case of Handicrafts in Nepal,International Centre for Integrated Mountain Development, Kathmandu, 1999.

40 For more background see “Education in Nepal-An Introduction”. <http://www.panasia.org.sg/nepalnet/education/edukatio.htm>

41 See “Human Resource Development in Information Technology in Tribhuvan University,” Tribhuvan University,Kirtipur, Kathmandu, November 1999.

42 For a brief assessment of Nepalese health care, see An Introduction to Health in Nepal<http://www.panasia.org.sg/nepalnet/socio/health.html>.

43 Rizyal, A., Medicos and Computers, Cyberpost,<http://www.nepalnews.com/contents/cyberpost/1998/Dec/Dec30/computer.htm>.

44 SatelLife, a non-profit initiative of International Physicians for the Prevention of Nuclear War, is a pioneer inthe support of network access to health information in developing nations. The have helped establishHealthNets in many nations. See <www.healthnet.org/hnet/hnet.html> for general information and<www.healthnet.org/hnet/nepal/> for a description of the Nepalese HealthNet. The name SatelLife derivesfrom the early use of a low-earth orbiting satellite for email.

45 This material is accessible within Nepal, but not all is Internet accessible.

43

Figure 5.1: State of the Internet in Nepal

5. Summary and recommendations

5.1 State of the Internetin Nepal

The Mosaic Group, mosaic.unomaha.edu/gdi.html, has developed a frame-work for characterizing the state of theInternet in a nation. They consider sixdimensions, each of which has five or-dinal values ranging from zero (non-existent) to four (highly developed).The dimensions are as follow:

• pervasiveness: a measure basedon users per capita and the de-gree to which non-technicians areusing the Internet.

• geographic dispersion: a measureof the concentration of theInternet within a nation, fromnone or a single city to nationwideavailability.

• sectoral absorption: a measure ofthe degree of utilization of theInternet in the education, commer-cial, health care and public sectors.

• connectivity infrastructure: ameasure based on international

Dimension Value

Pervasiveness 1

Geographic Dispersion 1.5

Sectoral Absorption 1

Connectivity Infrastructure 1

Organizational Infrastructure 2.5

Sophistication of Use 1

TOTAL 8

and intranational backbone band-width, exchange points, and last-mile access methods.

• organizational infrastructure: ameasure based on the state of theISP industry and market condi-tions.

• sophistication of use: a measurecharacterizing usage from conven-tional to highly sophisticated anddriving innovation.

A definition of each dimension and itslevels is shown in Annex 2, and Nepa-lese values for these dimensions areshown below:

Pervasiveness is rated as level 1, Em-bryonic. Nepalese Internet use hasclearly transcended the technical com-munity, and there are approximately30,000 users out of a population ofapproximately 22 million for a user rateof approximately 0.14%. If these wereall IP users, Nepal would be ranked atlevel 2, but many are UUCP users to-day. (WorldLink, the ISP with the most


Note: The higher the value, the better. 0 = lowest, 4 = highest.Source: ITU adapted from Mosaic Group Methodology.

44

Nepal Case Study

users estimated that 40% of their ac-counts were UUCP). It is clear thatNepal will rank at level 2 shortly.

Geographic Dispersion is rated be-tween level 1, single location and level2, moderate dispersion. While thereare points of presence in six cities out-side of Kathmandu, connectivity ishighly concentrated there. It is unlikelythat Nepal will achieve level 2, moder-ate dispersion, for some time, becausethat would require connectivity in overhalf of the 75 Districts, and many dis-tricts are historically under-served byall forms of infrastructure.

Sectoral Absorption is rated at level 1,rare. The ranking is a function of thelevel of connectivity server ownershipin business, government, health careand education, each of which are ratedas rare themselves. We found very lit-tle activity in the health, governmentand education sectors, so do not ex-pect improvement in this dimension inthe near future.

The Connectivity Infrastructure is atlevel 1, thin. There is no intracity do-mestic backbone, just VSAT connec-tions. (A fiber link is being installedalong the East-West road, but it is notyet operational, and, at present, it will

only cover the eastern portion of theroad). The sum of all international linksis at the low end of the level 2 range;there are no Internet exchange pointsand nearly all access is by modem overvoice lines. A near term increase in thisdimension does not seem likely.

The Organizational Infrastructure isbetween level 2, controlled and level 3,competitive. There are several ISPs,and no regulatory restrictions on theircreation. There is limited competitionin the provision of domestic infrastruc-ture; ISPs can provide wireless leasedlines for their customers. Internationalconnectivity is only available via VSAT,but it is not restricted by regulation.

Sophistication of Use is at level 1, mini-mal. A small user community is usingthe Internet in conventional applica-tions, primarily email. A good deal ofthat email is UUCP and Web pages aretypically static. We see little or no evi-dence of altered practices in responseto the introduction of the Internet.

This framework has been applied incase and questionnaire studies in sev-eral other nations, including some inthe region. The dimension values forother nations in the region are shownbelow for comparison with Nepal.

Date P GD SA CI OI SU TOTAL Source

Nepal 1-00 1 1 1 1 3 1 8

Bangladesh 3-99 1 1 1 1 1 1 6 M

China 5-00 2.5 3 2 2.5 2.5 2 14.5 M

China 12-98 2 3 2 2 2 2 13 M

India 12-99 2 2.5 1.5 2.5 3 2 13.5 M

India 8-99 2 3 1 1 3 3 13 Q

India 12-98 1 2 1 2 2 2 10 M

Sri Lanka 8-99 2 1 2 1 3 2 11 Q

Sri Lanka 8-98 1 2 2 1 3 3 12 Q

Pakistan 11-99 2 3 1.5 1 2 2 11.5 M

Note: P: Pervaiseveness, GD: Geographic Dispersion, SA: Sectoral Absorption, CI: Connectivity Infrastruc-ture, OI: Organizational Infrastructure, SU: Sophistication of Use. Values range from 0 (lowest) to 4 (highest).Source: M: national case study, MOSAIC Group, mosaic.unomaha.edu/gdi.html. Q: unvalidated question-naire result, Press, Larry, Second Internet Diffusion Survey, OnTheInternet, Vol. 5, No. 6, November/De-cember, 1999, som.csudh.edu/cis/lpress/gdiff/otidevnations.htm.

Table 5.1: State of the Internet in Nepal and neighbouring countries

45

5.2 Recommendations

The following recommendations ariseout of the analysis presented aboveand from experience of similarInternet studies in other countries.They are offered as the basis for fur-ther discussion.

5.2.1 Internet-friendly tariffs

The relatively high cost of Internet isa major barrier to Internet diffusion inNepal. Though the overall cost of dial-up access in Nepal is among the low-est in the region, it is still unaffordablefor the majority of the country’s inhab-itants. The problem is exacerbated bythe pricing structure where dial-up callsfor accessing the Internet also includelocal telephone usage charges (afterthe “free” calls included with the sub-scription are used up). Furthermore,the concentration of ISPs inKathmandu means that most peopleoutside the capital would incur longdistance telephone charges when uti-lizing dial-up Internet access.

There are a number of ways to reducethe price of Internet access in order toencourage diffusion. These practiceshave been adopted in different coun-tries around the world:

• Implement a nationwide dial pre-fix for Internet access. Calls tothis prefix would be charged at alocal rate. This eliminates theproblem of long distance tariffs forInternet access for users locatedoutside the local calling area ofInternet Service Providers.

• Eliminate ISP charges by hav-ing ISPs share the local telephonecharge with NTC. This is a modelpioneered by Freeserve in the UKand now adopted by a growingnumber of other countries.

• Eliminate or reduce the local callcharge for dial-up Internet ac-cess.

• Eliminate all charges for dial-upInternet access. This was re-cently announced by several UK-based companies who plan toearn revenue from other services

(customer’s voice calls, advertis-ing, e-commerce).

5.2.2 Full-fledged “SecondNational Operator”

Nepal is beginning to open and priva-tize telecommunications, but the cur-rent plans for tenders restrict biddersin terms of the services they may offer,the technologies they may employ andareas (international and domestic) theymay serve. We recommend that theserestrictions be removed. In particu-lar, the fact that the future mobileservices operator would not be givenan international license will greatly re-duce the commitment to invest.

The government should tender for afull-service competitor to the NTC. Thetender itself could be an importantpolicy instrument in that it might in-clude conditions that the successfulbidder would have to meet. For ex-ample, these conditions would spellout the provision of services to remoteparts of the country. These conditionsmight also be applied in a future li-cense for NTC, which should also bemade to adhere to the conditionsplaced on the new competitor.

5.2.3 Government support forInternet businesses

While the Internet community is notlooking for any specific assistancefrom government, there are areaswhere the government could help tocreate the right environment forInternet-based businesses to thrive.For example, there could be incentivesto help lighten the burden and risk forISPs, or businesses wanting to dosomething with the Internet. Thesemight include reducing the levels oftaxes and contributions to regulatoryand rural development funds, whichISPs are supposed to make, or specialdispensations with regard to the useof hard currency earned through e-commerce.

The government also needs to removeimpediments in other ways, e.g., makeVSAT licenses quick and automatic forjust a fee. The government should re-examine the ban on Internet Te-lephony. This service is inexpensive, a


46

Nepal Case Study

key factor for promoting communica-tion access in Nepal.

There are no open Internet Exchanges,only loose peering agreements. Whilethe liberalisation of the VSAT markethas enabled the ISP industry to growand become competitive, VSAT’s re-main expensive, and downstream pro-viders are at a disadvantage (bothpractical and in their marketing). Thegovernment or an ISP organizationcould contribute to overall cost sav-ings and efficiency by operating anInternet Exchange Point (IXP) and con-solidating international traffic.

5.2.4 Bring networks to univer-sities

One place for investment that may payrich results is in bringing networks tothe universities. The huge TU systemdoes not appear to encourage a lot ofenergy, imagination, and entrepre-neurial spirit. Having the Internet, andthe world it attaches to, directly avail-able to the students and young instruc-tors would be a good place to make adifference. There are organizations(e.g., the IoE) who are technically ableto make this happen if they have re-sources and support.

5.2.5 Electricity and literacy

In order to promote the spread ofInternet throughout the country, moreextensive electrification and literacyare necessary conditions. Only thegovernment could bring this about.Thus, it should be noted that the de-velopment of the Internet needs to beintegrated into a general governmentstrategy on economic and social de-velopment.

5.2.6 Public access

Efforts should be made to enhanceuniversal access to communication fa-cilities by pursuing a number of differ-

ent approaches. This includes facilitat-ing the provision of public payphonesand call centres. The former will re-strict access to voice telephony unlesspayphones with terminals can be in-stalled.46 The latter can be upgradedto include Internet access. The provi-sion of communication facilities in pub-lic locations such as schools, postoffices, etc. should also be pursued.This can be done by requiring telecomoperators and ISPs to provide free ordiscounted connections to public loca-tions as part of their license obliga-tions. 47 International donors also havenumerous programmes for enhancingInternet connectivity and the Nepalesegovernment should be actively pursu-ing these projects.48

5.2.7 Village Connectivity PilotProject

The UNDP Poverty Report 2000stresses the role of government ineradicating poverty. They emphasizedecentralization and empowerment oflocal government, and recommendexpanding access to information andcommunication. Village connectivityprojects are underway in many na-tions. Given Nepal’s social goals andgrowing urban population, they shouldgain experience in this area. The Min-istry of Local Development, which isresponsible for strengthening local in-stitutional development, such as bol-stering the district and villagedevelopment committees could per-haps conduct one or more pilot projectsin village Internet connectivity. Theproject could be funded from the tel-ephone rural development fund. Sucha project would provide practical ex-perience with e-commerce technologyand applications in rural areas, andwould hold the promise of improvingquality of life and discouraging move-ment to urban areas. There are manyvillage networking projects in the re-gion that Nepal could learn from.

47

1 Ascom, the Swiss telecom equipment manufacturer, is installing multimedia card-operated payphones forMTNL of India. The payphones provide Internet access and e-mail. See Ascom. “Multimedia Services inIndia.” Contact Magazine. January 2000.<http://139.79.106.31/digitalassets/48/file45364_0_contact_2000_01_e.pdf>

2 In the US, operators contribute to a fund that is used to provide discounted telecommunication and Internetaccess service to schools and libraries. See <http://www.fcc.gov/ccb/universal_service/schoolsandlibs.html>.

3 For example, the World Bank’s World Links for Development (WorLD) program provides Internet connectivityand training for teachers, teacher trainers and students in developing countries in the use of technology ineducation. WorLD is currently active in 15 developing countries — Brazil, Cape Verde, Chile, Colombia,Ghana, Mauritania, Mozambique, Paraguay, Peru, Senegal, South Africa, Turkey, Uganda, West Bank / Gazaand Zimbabwe. See <http://www.worldbank.org/worldlinks/english/index.html>.


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Annex 1: Organizations met

The project team visited Nepal 17 – 21 January 2000 to carry out fieldresearch. Below is the list of organizations and people met.

Sr. No.

Description Time Place Date

1. Meeting With Dr. Rameshananda Vaidya, Member National Planning Commission.

09.30 NPC, Singha Durbar

January 17th 2000

2. Meeting with Egbert Pelinck, Director General ICIMOD

1400 - 1500 Pelinck’s office January 17th 2000

3. Meeting With Mr. Bhoop Raj Pandey, Chairman Nepal Telecommunication Authority.

1030 – 1300 NTA, Singha Durbar

January 18th 2000

4. Meeting with Mr. Shree Ram Poudel, Secretary, Ministry of Information & Communications.

1400 - 1500 MOIC, Singha Durbar

January 18th 2000

6. Meeting with Mrs. Sabitri Singh, Deputy Director General, Department of Statistic.

1500 – 1600 Thapathali

January 18th 2000

7. Meeting with Mr. C.P Bhattaria, General Manager, NTC and Meeting with Mr. Raghubar L. Shrestha, DGM, and Mrs. Laxmi K. Shrestha, DGM NTC.

1100 – 1300 NTC, Central Office January 19th 2000

8. Meeting With Kiran Sharma, Vivek Rana and Rajib Subba, Nepal Internet Users Group (NIUG)

1400 – 1500 NIUG Office January 19th 2000

9. Meeting With Licensed Internet Service Provider (ISP) Groups and Radio Paging Service Groups and CAN President of Nepal

1530-1630 Mercantile Communication

Pvt. Ltd. Conference hall,

Cyber café building

January 19th 2000

10. Meeting with Tribhuvan University 1500-1600 Vice-Chancellor’s office

January 20th 2000

10. Meeting with ICT Policy & Strategy Steering committee Members

12.00 –1400 NPC January 20th 2000

49

Annex 2: Framework dimensions

Table 1: The Pervasiveness of the Internet in Nepal

Table 2: The Geographic Dispersion of the Internet in Nepal

Sector Subsectors Academic Primary and Secondary education University education Commercial Distribution,

Finance Manufacturing

Retail Service

Health Hospitals Clinics

Research Centers Physicians/Practitioners

Public Central Government Regional and Local governments

Public companies Military

Table 3: Internet-using Sectors of the Economy

Annexes

Level 0 Non-existent: The Internet does not exist in a viable form in this country. No computers with international IP connections are located within the country. There may be some Internet users in the country; however, they obtain a connection via an international telephone call to a foreign ISP.

Level 1 Embryonic: The ratio of users per capita is on the order of magnitude of less than one in a thousand (less than 0.1%).

Level 2 Established: The ratio of Internet users per capita is on the order of magnitude of at least one in a thousand (0.1% or greater).

Level 3 Common: The ratio of Internet users per capita is on the order of magnitude of at least one in a hundred (1% or greater).

Level 4 Pervasive: The Internet is pervasive. The ratio of Internet users per capita is on the order of magnitude of at least one in 10 (10% or greater).

Level 0 Non-existent. The Internet does not exist in a viable form in this country. No computers with international IP connections are located within the country. A country may be using UUCP connections for email and USEnet.

Level 1 Single location: Internet points-of-presence are confined to one major population center.

Level 2 Moderately dispersed: Internet points-of-presence are located in at least half of the first-tier political subdivisions of the country.

Level 3 Highly dispersed: Internet points-of-presence are located in at least three-quarters of the first-tier political subdivisions of the country.

Level 4 Nationwide: Internet points-of-presence are located in all first-tier political sub-divisions of the country. Rural dial-up access is publicly and commonly available and leased line connectivity is available.

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Nepal Case Study

Sector Rare Moderate Common Academic - primary and secondary schools, universities

>0-10% have leased-line Internet connectivity

10-90% have leased-line Internet connectivity

>90% have leased-line Internet connectivity

Commercial-businesses with more than 100 employees

>0-10% have Internet servers

10-90% have Internet servers

>90% have Internet servers

Health-hospitals and clinics

>0-10% have leased-line Internet connectivity

10-90% have leased-line Internet connectivity

>90% have leased-line Internet connectivity

Public-top and second tier government entities

>0-10% have Internet servers

10-90% have Internet servers

>90% have Internet servers

Table 4: Sectoral Use of the Internet

Table 5: The Sectoral Absorption of the Internet in Nepal

Table 6: The Connectivity Infrastructure of the Internet in Nepal

Sectoral point total Absorption dimension rating 0 Level 0 Non-existent 1-4 Level 1 Rare 5-7 Level 2 Moderate 8-9 Level 3 Common 10-12 Level 4 Widely used

Domestic backbone

International Links

Internet Exchanges

Access Methods

Level 0 Non-existent

None None None None

Level 1 Thin ≤ 2 Mbps = 128 Kbps None Modem Level 2 Expanded >2

– 200 Mbps >128 Mbps -- 45 Mbps

1 Modem 64 Kbps leased lines

Level 3 Broad >200 Mbps -- 100 Gbps

>45 Mbps -- 10 Gbps

More than 1; Bilateral or Open

Modem > 64 Kbps leased lines

Level 4 Immense > 100 Gbps > 10 Gbps Many; Both Bilateral and Open

< 90% modem > 64 Kbps leased lines

51

Table 8: The Sophistication of Use of the Internet in Nepal

Table 7: The Organizational Infrastructure of the Internet in Nepal

Annexes

Level 0 None: The Internet is not present in this country. Level 1 Single: A single ISP has a monopoly in the Internet service provision

market. This ISP is generally owned or significantly controlled by the government.

Level 2 Controlled: There are only a few ISPs because the market is closely controlled through high barriers to entry. All ISPs connect to the international Internet through a monopoly telecommunications service provider. The provision of domestic infrastructure is also a monopoly.

Level 3 Competitive: The Internet market is competitive and there are many ISPs due to low barriers to market entry. The provision of international links is a monopoly, but the provision of domestic infrastructure is open to competition, or vice versa.

Level 4 Robust: There is a rich service provision infrastructure. There are many ISPs and low barriers to market entry. International links and domestic infrastructure are open to competition. There are collaborative organizations and arrangements such as public exchanges, industry associations, and emergency response teams.

Level 0 None: The Internet is not used, except by a very small fraction of the population that logs into foreign services.

Level 1 Minimal: The small user community struggles to employ the Internet in conventional, mainstream applications.

Level 2 Conventional: The user community changes established practices somewhat in response to or in order to accommodate the technology, but few established processes are changed dramatically. The Internet is used as a substitute or straight-forward enhancement for an existing process (e.g. e-mail vs. post). This is the first level at which we can say that the Internet has "taken hold" in a country.

Level 3 Transforming: The user community's use of the Internet results in new applications, or significant changes in existing processes and practices, although these innovations may not necessarily stretch the boundaries of the technology's capabilities. One strong indicator of business process re-engineeering to take advantage of the Internet, is that a significant number (over 5%) of Web sites, both government and business, are interactive.

Level 4 Innovating: The user community is discriminating and highly demanding. The user community is regularly applying, or seeking to apply the Internet in innovative ways that push the capabilities of the technology. The user community plays a significant role in driving the state-of-the-art and has a mutually beneficial and synergistic relationship with developers.

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Nepal Case Study

Level Individual Use Organizational Use Level 0 None

No use of the Internet No use of the Internet

Level 1 Minimal

E-mail communication or Web browsing is an infrequent, and novel experience.

E-mail is available, but is not used as an alternative to traditional inter-personal communications (memos, telephone, meetings). Web sites consist of a very small number of static pages reflecting a "minimalist brochure."

Level 2 Conventional

E-mail may be a preferred means of communicating with people in an individual's circle of acquaintances. Web surfing is a regular activity. Some individuals maintain Web sites to post personal interest information. Individuals may listen to broadcast programming on the Web rather than on the radio or television. On-line Chat is an advanced form of Level 2, or possibly a Level 3, depending on whether it is primarily entertainment or results in changes in the individual's social network.

E-mail is widely used for both official and unofficial communication. Listservs or their equivalent are used to disseminate information or solicit feedback. Web sites are largely static, but are extensive and provide customers with in-depth information about products and services, utilization of those services, comparative information, etc. The content is more than just advertisement.

Level 3 Transforming

On-line communities proliferate around shared interests. These communities bring together people who otherwise would not have contact with each other. Interaction between members of such communities is substantive and often interactive. Examples include on-line Bridge clubs, use of ICQ (“I seek you”) to create communities, Individuals' Web-cams (e.g. Jenni-Cam knock-offs).

Web sites are dynamic, becoming an alternative distribution channel. On-line ordering is possible. Customer service functions expand to permit customers to conduct transactions that formerly involved employees (e.g. home banking, FedEx package tracking, etc.) International companies use the Internet as a substitute for business trips, enabling round-the-clock collaborative product development. E-Commerce has taken hold.

Level 4 Innovating

Highly sophisticated forms of technology supporting inter-personal interaction and access to content are not only used by, but developed for, a demanding customer base. Principal examples include the development (not just use) of highly-interactive on-line games, ICQ ("I seek you").

The fundamental structure of organizations and their external relations with other organizations is altered. Examples include Egghead Software, which no longer has a bricks-and-mortar presence, and Amazon.com, the on-line bookseller. Business to Business (B2B) vertical exchanges continue to add more and more value as they integrate enterpise information systems.

Table 9: Examples of Sophistication of Use of the Internet (circa 1999)

53

Acronyms and abbreviations

Acronyms and abbreviations

BT British Telecom

DoT Department of Telecommunications (India)

GNP Gross National Product

ISP Internet Service Provider

IT Information Technology

ITU International Telecommunication Union

LAN Local Area Network

LDC Least Developed Country

MBA Masters of Business Administration

MIS Management Information Systems

MoD Ministry of Defence

MoIC Ministry of Information and Communication (sector ministryresponsible for broadcasting and telecoms

MoST Ministry of Science and Technology

NIUG Nepal Internet Users Group

NPC National Planning Commission

NRS Nepal Rupees. Approximate exchange rate to one United Statesdollar = 68.7 (end January 2000)

NTA National Telecommunication Agency (telecom regulator)

NTC National Telecommunication Corporation (incumbenttelecommunication company)

NTV Nepal Television

PCC Public Call Centres

PCO Public Call Offices

PSTN Public Switched Telecommunications Network

RTDF Rural Telecommunication Development Fund

SAARC South-Asia Association for Regional Co-operation

UNDP United Nations Development Programme

UNHCR United Nations High Commission on Refugees

VDC Village Development Committee

VOIP Voice Over IP

VSAT Very-Small Aperture terminals

WLL Wireless Local Loop

Documents

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