Setoral

ISPs Scared by Telecom Giant

By Ojaswi Gautam

If there are talks of privatizing Nepal Telecommunications Corporation (NTC) on one hand, the state enterprise itself has announced that it would now also provide Internet and e-mail services. This has made customers happy because of reduced service prices offered by the corporation. But it has also sent jitters to private service providers who now have to fight with a competitor that is not only the biggest of them all but one that also has basic infrastructure in place.

NTC has started these new services since May 4, for which it received license two month ago. According to NTC, the monthly fees for Internet service is Rs. 1000, Rs. 5,500 for half year and Rs. 10,500 per annum. Similarly the fees for e-mail service is Rs. 1000 per annum. This rate is half of what is charged by private Internet Service Providers (ISPs), who bill around Rs. 1800 per month in average.

Reacting to the prices quoted by NTC, Deepak Adhikari, professionally an architect engineer who is also a cyber club lover, says, "Hearing this announcement, I didn’t believe myself initially but then I decided to buy my own computer."

NTC has also assured its customers about its ability to provide quality service saying it had already made direct contact with New York-based Telegraph Company through Kathmandu-based Sagarmatha Earth Station. NTC’s Business Department manager Madhu Sudan Karmacharya states, "By using our fast, cheapest and reliable service, customers can easily distinguish our service from that of private ISPs." Presently the private ISPs are using Information Super Highway through Singapore gateway, which is considered slower than service through direct contact.

NTC’s entry into this new business has suddenly made the market competitive. Consumers are expecting further reduction in the price. In this context, private ISPs are fearing unmanned price war. ISPs clearly know that they are at a disadvantage because of their dependency for telephone lines on NTC. While NTC has started its new services with 240 telephone lines and is ready to extend to 1000 telephone lines, private ISPs are using only about 600 lines. This shows where private ISPs stand.

Now private ISPs are studying how NTC’s entry is going to affect their business. They could present no clear view till the date of this report. But according to the marketing manager of Mercantile Communication, Madhu Amatya, "It is not necessary to feel threatened of NTC entering the market. If it follows market norms and values fairly then it is acceptable. There may be problems only when NTC tries to play the game in other ways". Including Mercantile, there are 12 private ISPs operating.

The third amendment in the Tele Communication Act adopted in 2053 BS, and new Tele Communication Policy adopted in 2057 permit anyone, including NTC, to provide this kind of service after fulfillment of certain criteria. To check, regulate and manage such service providers a regulatory body, Nepal Telecommunication Authority (NTA), has been established. A senior officer of NTA, Kailash Neupane, says that they had issued license to NTC within the framework of the prevailing law and policy of HMG, considering the starting phase of private ISPs. Neupane adds, "NTA granted permission to NTC within the same terms and conditions and the facility applicable to private ISPs. If private ISPs feel any threat from NTC then they had better search for other alternatives." The law and policy clearly state that private ISPs can develop their own telephone network to provide their services, though they are not permitted basic telephone service, which is to be opened not earlier than 2004 AD.

At a time when private ISPs are facing a new competitor in the form of a public sector giant, the government immediately and unexpectedly called on them to deposit Telecommunication Service Charge (TSC) of previous year 1998/99, which may amount to more than Rs. 4 million, as estimated by the industry watchers. According to the laws, the TSC amounts to 10 percent of total telephone bill. But Rajib Pradhan, CEO of Lotus Holdings (P) Ltd., that only last year entered this business by setting up an ISP Company (Everest Net), says: "The license document of ISPs granted by NTA does not mention anything about TSC." The bills sent so far by NTC to ISPs against the use of NTC lines also did not include TSC. Private ISPs were paying only 16% of their total income to NTC - 2% as contribution for telecommunication development, 4% as royalty to NTC for the use of NTC lines and 10% as VAT. Adding 10% TSC, the private ISPs will now have to pay 26% of their total bill.

But ISPs are refusing to pay this new service charge. And they have their valid arguments. First, it is not mentioned in the license paper; second, they are unable to collect the amount from customers since it is related to the old fiscal year; and third, with this charge there is no margin left for them to conduct this service. However, what margins they are earning from the business is not easy to dig out as they all are private limited companies and their financial details are secret. Mercantile’s Amatya says, "Because we are providing telecommunication’s value added service, the charge is unfair. Had government informed us about it previously, we could have managed to retrieve the money from our customers, but now it is not possible." But this service charge is being paid by all coustomers for the use of basic telephone services from NTC.

Now the private ISPs are negotiating with the government agencies, i.e. the Ministry of Finance and Ministry of Communication. But they have not yet been successful in getting their demand fulfilled. A tax officer says on condition of anonymity that the announcement of new service by NTC and a claim of service charge by the government from ISPs, is only a coincidence. Stressing upon the service charge he adds, "If ISPs are unable to deposit the amount demanded within the given time, they will be stopped from continuing their business. We cannot go beyond the law."