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The ongoing technology revolution is riding on communication technology. What are the challenges that are faced by Nepal in this field?

The first thing that comes to mind while talking about communication technology is the digital divide. Lack of telephone connections has restricted even educated and literate Nepalis from reaping the benefits of the ongoing IT revolution.

Developments in recent times, however, show signs of some good things to come, though given the experience so far people are sceptical.

Rakesh Sitaula and his partner Anand Shrestha had returned to Nepal with big entrepreneurial dreams and over six years of work experience in the Unites States and wanted to start a boutique outsourcing firm with a niche market in the US and had even secured some Venture Funds from the US. Nepal being a virgin territory, any type of VC funding come with the conditions of a speedy completion of pre start up infrastructure attached. Rakesh and Anand originally from Dharan and Butwal appear as if they are caught up in the very first hurdle of securing reliable 15 number telecommunication lines that will serve as the foundation of their BPO business. It has almost been three months since they applied for the connections. They are, however, finding it extremely hard to get access to the connection and are likely to lose the funding should they fail to meet the conditions within a fortnight. Many a dream is closely linked to the connected world of telecom and is there a way to facilitate the growth of many other people like Rakesh and Anand in Nepal?

# State-owned Nepal Telecommunications Corporation, which provides land lines as well as GSM-based cellular mobile telephone connections, is now transformed to a limited liability company (and is named Nepal Telecom - NTC) in the process of its eventual privatisation. Meanwhile, it has opened a letter of credit to import equipment to start providing WLL-based telephone connections in Kathmandu valley and some other towns within the next 9 or 10 months. 'It is a prestigious project for the company and the work is going on on a war footing' says Sugat Ratna Kansakar, Managing Director of NTC. The plan is to distribute one million connections.

# United Telecom Ltd. (UTL) is providing WLL-based telephone connections on the asking. Though its customers were complaining of some hitches during the initial days, they are now solved, claims NR Mokhariwale, the CEO of UTL.

# Meanwhile, the new owners of Spice Nepal (P) Ltd. say that they are working to start providing cellular mobile telephone connections based on GSM from April 2005. 'Our plan is to distribute one million connections,' says Ajaya Kumar Sumargi, the Managing Director of Raj Group Company (P) Ltd. which now owns 95% of Spice Nepal shares after buying them from Khetan Group and ModiCorp of India (5% shares are still with Spice Nepal of India due to technical reasons. The existing policy requires at least one partner which has experience of successfully operating a network of 50,000 lines).

# The first phase of laying an optical fibre network has been completed connecting Biratnagar in the east to Lamahi in the west and it is at the testing phase.

# Most importantly, Nepal Telecommunications Authority (NTA), regulator of the telecommunication sector, can now issue licenses to new telecom companies as its earlier promise to existing licensees was to stop new license distribution until the end 2004. Though it has not started distributing new licenses, NTA officials say that they are waiting for an amendment in the existing Telecommunication Act to be effected. According to them, the amended Act is expected to come into force within a couple of months.

The policy of ushering in competition in the telecommunication sector has already started showing positive results. Getting a telephone connection is not so big a problem as it used to be. People irritated by the long wait for an NTC connection could always go on for UTL, which gives you the connection within half an hour. A similar service can be expected from NTC when it starts with WLL lines, and which according to the schedule revealed by Kansakar would be within the next nine or 10 months. Those complaining of different hitches in NTC's cellular mobiles can have the option of Spice Nepal.

The biggest change that has come about due to the increasing competition is the attitude of the NTC staff in dealing with the customers. Some changes have been already noticed. Kansakar informs us that the company is conducting training for its employees in order to adapt to the competitive environment and the company's eventual privatisation.

Equally important is the speed with which new value-added services are being introduced. The latest from NTC is EasyCall cards (see the New Launches column in this issue). 'More products under the Intelligent Network system are being introduced in the near future,' says Kansakar. One example of such forthcoming products is the 'home country dialling' which enables you to charge a call you make in from a foreign country to your home telephone number without paying for the call there. Similarly, 'free phone' facility is the other product that is being introduced. Under it, you can make calls to your office toll-free, i.e. the caller does not have to pay for the call, your office will pay for the call. This is particularly useful for those institutions which have to encourage their customers to promptly contact the office.

Similarly, NTC is also coming up with new ways to do away with long queues for paying bills. The bills are already available over the Internet and for the collection of mobile telephone bills it is tying up with different banks so that a customer with an account in the partner bank can pay his/her bill through their bank account. Moreover, a system is being started to make it possible for you to pay your telephone bills at any counter of NTC. 'This system is already in use at the Patan and Naxal exchanges and is being extended to other exchanges as well. Very soon, we will have a similar system for the entire country so that you will be able to pay the bill for your Biratnagar telephone line in Kathmandu,' he says.

'While getting a connection is a one time event, bill payment is a monthly routine. This must not be a drudgery if we have to retain the customer for long,' he adds taking the future into account when retaining customers will be a challenge due to competition among telecom operators.

One important benefit that a telecom user expects from the increased competition is reduced prices. Kansakar assures that the rates may go down because of the equipment getting cheaper and not only due to the competition. Giving an example of Palung, a hilly area in Makwanpur district, Kansakar informs that per line cost of providing telecommunication connection there was calculated to come upto US 295 if conventional method was used (considering the cabling, civil works, poles, exchange equipment etc.) but when the same would be done using the CDMA equipment now being imported by NTC, the cost would be as low as US $ 100 per line. Being a wireless technology, CDMA is suited for rural areas where the demand density is low.

Also an optical fibre network will reduce the call charges in addition to improving the bandwidth which enhances the data transfer speed. The expectation of an across-the-board reduction in prices, however, is not likely to be met. What is likely is a reduction in prices of long distance (domestic as well as international) calls, but some hike in local calls. According to Kansakar, the local call rate in Nepal is among the cheapest in the world. Till now, NTC is cross-subsidising local calls from the profits of domestic and international calls. However, as the foreign operators are pressed to reduce international call rates due to the growing grey market in such calls, NTC too has to reduce the rates to matching levels. The deficit will have to be met through raising local call rates. 'However, right now we have no such compulsion and it is not likely in the near future,' he says though not totally ruling out the possibility of rate hikes in the more distant future.

The substantial reduction in mobile telephone rates in India in recent years is, however, causing a big pressure on NTC, concedes Kansakar. Recalling a recent report over BBC, he says, the mobile rates in India are the lowest in the world and people here also expect similar low rates. 'How can I convince the people here that when an Indian telecom company decides to install a new system, the size of the tender they talk of is in the range of five million lines? This enables them to get the system at a very low price. In Nepal, however, the largest single tender so far has been of 100,000 lines only. Our customers should also understand that the monthly rental on a telephone line in India is double the rate we charge here.'

At a time when the availability of the product itself is a problem, price may not be an important consideration. NTC has a waiting list of 321,200 applications for land lines as of October 2004 after distributing 417,900 lines out of the installed capacity of 484,400. However, the waiting list is mainly for lines that cost Rs. 8,500. In case of the other connection that costs Rs. 13,500, there is virtually no waiting list. That may explain why UTL is not able to increase the distribution of its connections that cost about Rs. 15,000 per line. According to Mokhariwale, UTL has been able to distribute about 25,000 lines as of October 2004. This could possibly indicate that the pent-up demand may not be as high as it is believed to be. Many people may have filled an application under their family members' names in the hope that they would be able to sell the connection at a premium in the black market. However, the long lines seen when NTC was distributing pre-paid mobile connection confirms that the demand for such connections is indeed very high. Another fact it indicates is that those who were waiting for land line connections have now opted for mobile connections.

Competition in prices could be fierce when UTL is allowed to distribute handheld sets. As the cost per line under CDMA technology is cheaper than in GSM, this can be expected to reduce the rates as quickly as it did in India where price reduction was spearheaded by operators using CDMA. (See below for the differences and similarities in CDMA and GSM). This could increase the demand once again. Right now it is only UTL that has the CDMA equipment and it is facing different hurdles in distributing handheld sets that are required to provide mobility to the user. As NTC too is installing CDMA, handheld sets under CDMA technology would be a normal thing in the near future, and hence there is the likelihood of mobile telephone prices decreasing. If that happens it may be tough for Spice Nepal which is to use GSM technology.

Telecom users expecting more facilities, lower prices and better services are also waiting for the privatisation of NTC which they hope will improve things further as they think that NTC employees are still basking under the strong employee protection rules which ensure the same facilities even when they do not work efficiently. As a result, the employee productivity in NTC is very low. It has 11.58 employees per thousand telephone line as of October 2004. Though it is significantly reduced from 12.5 persons per line a year earlier, it still needs reduction to bring it to the level of international norms.

That may require employee retrenchment, but Kansakar hopes that he may not need to resort to that. 'Since we are going for a massive expansion in the near future, we may be able to adjust all of our 5,000 employees,' he says. That may pre-empt any trade union antagonism in NTC.

At present, a European company is engaged in evaluating NTC assets which is expected to be complete not before three or four months due to the nation-wide spread of the assets. 'We may then start the privatisation process, but this can be explained better by the Finance Ministry,' says Kansakar. According to the plan announced, 15% of the NTC shares are to be divested allocating 5% to the employees of the company and 10% to the general public.

To improve employee productivity Kansakar has adopted the Quality Circle (QC) method in the organisation as a motivational tool, and so far 16 meetings of such circles (70-80 persons in each circle) have been held already, he informs. Similarly, he has been arranging training tailored to NTC's need for senior level managers in the company.

While these initiatives may improve NTC's efficiency, these alone are not enough for NTC to be forced to reduce charges as long as it enjoys its present domination over the business.

While big projects of national level companies such as NTC, UTL and Spice Nepal are making news because of their volume and their direct impact on the lives of urban people, there are a number of other smaller players bringing about a silent revolution in the rural and remote areas. One case is STM Telecom Sanchar (P) Ltd. licensed to provide telecom facilities to 534 villages in the Eastern Development Region using satellite based V-SAT technology. The other one is Global Plus which has already started telecentres at a number of places in Mustang district and is trying to do the same in other mountainous areas (see Nubiz November 2004 for more about Global Plus).

Multiplicity of operators will bring in another policy issue which would be the distribution of the spectrum license. Presently the Radio Frequency Policy Fixation Committee, headed by the Minister of Charge of Communication and Information, is taking decisions on this. When the number of private sector operators using the airwaves for their business increases, they will however, start raising their voices for representation in the committee. Questions will also be raised about how the licenses granting rights to use the spectrum, which is a scarce resource, are being distributed. At present, such a license is granted by assessing an applicant's qualifications. There are, however, a number of different models being used for such decisions whereby both the revenue to the government and efficiency in the use of this scarce resources are optimised. Certain bands are to be reserved for third generation (3G) telecom services.

The other but more urgent question would be regarding the interconnection charge: its level as well as the break up (for origination, carrying and termination): Since mobile telephones require interconnection provided by wired networks, the mobile operator, which also has the wired network, will have an edge over those who do not have such a network and therefore have to depend on its competitor's network.

Whether the existing regulatory regime will be able to address these and other associated issues is still anybody's guess.

WLL and cellular communications are both wireless technologies whereby electromagnetic signals are sent through the air between the users' handsets and access switches which then connect the signal to a network, which is usually wired.

The concept of a 'cellular' wireless network came about because during the initial design, different regions were divided into 'cells', each to be serviced by a different base station. Those moving from one 'cell' to another would be 'handed off' to the corresponding base station servicing the new cell. The network of base stations could provide access to those moving around in a large area. Different protocols have been used in digital cellular telephony including TDMA, CDMA and GSM. Once the wireless call of a cellular phone subscriber reached the base station servicing him, it would 'dump' his call to the nearest wired network. Thus, the cellular network mostly provided wireless access only. Without inter-connect provided by the wired network, mobile operators would not be able to provide complete service to their customers. It is quite the norm for a wireless operator to pay inter-connect charges to the wired network operator.

In fact, most people, the world over, call WLL 'fixed wireless' or 'fixed radio access'. Without a system (like the cellular system) to manage a truly mobile customer, with hand-offs and other such facilities, those using WLL will lose their phone call if they move around too much. The question is how far could WLL subscribers move around before they end up like mobile cellular subscribers; this depends on the technology and system used.

Most WLL implementations do not provide much mobility whether they use or don't CDMA technology. In most countries, WLL is used in low and medium-demand density areas, and use proprietary system that are not available on public wireless networks. In general, these system do not provide mobility. WLL implementation in what is called PCS/PCN standard, uses low-power antennas and lightweight inexpensive handsets, and offers low mobility, not much more than one to two kilometres. Then, of course, there is the CT-2/DECT standard which is simply an extension of the cordless phone. To extend the mobility of the fixed wireless system, one can always set up a system of WLL switches that can hand-off calls to each other. This then becomes virtually 'cellular'.

In recent years, two other fixed wireless services have been deployed in many countries: multi-channel multi-point distribution service (MMDS) and local multi-point distribution service (LMDS). In the US, MMDS operates in the 2-GHz frequency band and can provide access over a distance of about 50 km from a central transmitter site. LMDS uses transmitters operating in the 28-GHz frequency band with each transmitter covering a distance of about 5 km. Clearly, there is significantly more mobility in these technologies than in traditional fixed wireless.

In all WLL implementations, as in the case of cellular, WLL operators will not be able to fully service their customers without inter-connect provided by both wired operators and mobile ones.

Fixed wireless can be deployed very quickly. It generally has a much lower incremental cost than copper, and is much cheaper to deploy at lower subscriber densities. Given the 'fixed' nature of the technology, the switches have to do very little work in providing wireless access. Thus, the WLL switches are also less expensive compared to cellular switches. Further, using CDMA or DECT for WLL service is less costly than using GSM. The GSM architecture was designed to handle international roaming and as such the switches have to deal with a large amount of overhead work. The lower the mobility, the lower the cost of the antennas, switches and handsets.

Global System for Mobile communications (GSM) and Code Division Multiple Access (CDMA) are the two technologies that are used for mobile telephony worldwide. GSM was developed by European companies, while CDMA was developed by the American company, Qualcomm. GSM accounts for about 70% of the global mobile market and it uses a variation of Time Division Multiple Access (TDMA) and is the most widely used of the three digital wireless telephone technologies (TDMA, GSM and CDMA). GSM digitises and compresses data, then sends it down a channel with two other streams of user data, each in its own time slot. It operates at either the 900 MHz or 1,800 MHz frequency band. CDMA uses a unique code to distinguish each different call, which enables many more people to share the airwaves at the same time - without static, cross-talk or interference. This also makes CDMA more spectrum efficient than GSM.

When mobile telephony was first allowed in Nepal, GSM was the predominant digital mobile technology in the world being used by most of the developed nations. The US was the only major exception, where GSM virtually did not exist. This was because American telecom companies had made huge investments in the old analogue technologies. However, over a period of time old analogue technologies are being phased out in the USA. All new network expansion is either on CDMA or on GSM. Therefore, there was a certain rationale then to opt for GSM technology. This meant that mobile subscribers were able to roam all over the world with the same telephone number. The cost of GSM infrastructure equipment and handsets was lower than that of CDMA. Moreover, CDMA was not as developed and commercially successful a technology as it is today. However, in the last few years prices have decreased in CDMA and it has proved to be a better technology for data applications.

CDMA 2,000, which is currently being widely deployed worldwide, is better spectral efficient compared to any existing radio access technology in terms of both voice capacity and data throughput per MHz per sector. CDMA 2,000 permits 28 voice (i.e. 28 people can talk simultaneously) and data users or more and greater than 120 kbps of average data throughput per 1.25 MHz per sector and thus has higher spectral efficiency than either GSM or TDMA. Even though developments are taking place in GSM too, the spectrum efficiency as of date is much less than in CDMA.

CDMA was initially introduced in India as a fixed line technology and its purpose was to replace copper in the last mile access with wireless. However, due to technology development and the fall in prices, the fixed line operators demanded that they should be allowed to provide mobile telephony using CDMA. However, their licenses did not permit it. Therefore, the Indian government made amendments in the old basic telecom licenses and allowed them to provide limited mobile services. Limited mobile telephony was part of the new basic telephony licenses that were acquired by companies like Reliance, the Tatas and Bharti. Under the unified licenses regime, basic telephone operators would be able to provide full mobile services, not just limited mobility. Both the quality of voice and the data access speed is better in CDMA, therefore, CDMA operators are expected to give a tough fight to the GSM operators.

Telephone lines distributed (Approx., as of October 2004)
Operator	No. of lines
NTC (PSTN)	417,900
UTL (WLL)	25,000
NTC (Mobile)	241,300 (including pre-paid connections of 171,800)
Teledensity (of NTC’s PSTN)
Overall	1.71 lines per hundred people
Urban areas	12.2 lines per hundred people
Rural areas	0.2 lines per hundred people
Overall (PSTN + Mobile)	2.7 lines per hundred people

In Nepal too, United Telecom licensed to provide wireless telephone service is silently fighting to get the permission to provide mobile services using CDMA technology that it is already being used for its wireless fixed line service. Meanwhile, Nepal Telecom, which is providing traditional fixed line wired service as well as service using GSM, is soon to start providing wireless service using CDMA. The complexities will increase when Nepal also goes for unified licensing regime.

Even after four years in twenty–first century, there remain vast differences in access to telecommunications throughout the world. The most common parameter of telecom access is teledensity or the number of main telephone lines per 100 inhabitants. The teledensity ranges from 0.08 in some of the least developed countries to more than 99 in the most developed countries. More than 90 percent households in high income countries have a telephone compared to less than 30 percent in the rest of the world. The majority of the population in developing countries live in rural areas. Yet in these countries, over 80 percent of main telephone lines are in urban areas.

In Nepal, total telephone penetration in Asad 2061 is 2.4 percent. While the teledensity in urban areas is 12 and in rural areas it is less than 0.2 percent.

The HMGN recognized that provision of world class infrastructure is the key to rapid economic and social development of the country. It is critical not only for the development of the IT industry, but has widespread ramifications on the entire economy of the country. A major part of the GDP of the country would be contributed by this sector.

Keeping in view the need of an appropriate and qualitative telecom services, HMGN implemented National Communications Policy 2049 (1992). The Telecommunications Act 2053 (1997) was enforced for the purpose of having competitive atmosphere by the telecom service operators and service providers in order to speed up the process of development of telecom services in Nepal.

Accordingly, Nepal Telecommunications Authority (NTA) was established in February 1998 as the telecom regulator of the country. Its objective is to create a favorable and competitive environment for the development, expansion and operation of telecommunications services with the private sector participation in Nepal. Its aims are:

# To make the telecommunications service reliable and easily available to the public.

# To make necessary arrangement to avail basic telecommunications service and facilities in all rural and urban areas throughout the kingdom of Nepal.

# To protect the rights and interests of consumers by ensuring the provision of quality service.

# To make arrangement for the coordination and healthy competition among the persons providing Telecommunications Service and facilities.

Having realized that the required resources for achieving universal access, increase in teledensity, augmentation in number of Public Call Offices (PCOs) and FAX/ IT Centres cannot be met from Government sources alone, HMG encouraged private investment and involvement of private sector in order to bridge the resource gap. The Telecommunications Policy 2056 (1999) was formulated to grant licenses at any time to any number of operators for value added services like the Internet, VSAT, Radio Paging, FAX and other services.

For Basic Telephone Service and Mobile Telephone Service, HMG through the Telecommunications Policy 2056 (1999) adopted a cautious approach. The Nepal Telecom was already operating Basic Telephone Service and Mobile Telephone Services. NTA was advised to grant one additional license, through global tendering process, for Basic Telephone Service based on WLL technology and Mobile Telephone Service (GSM based) to private operators. Thus, duopoly pattern was adopted. The private basic service operator has commenced its services with effect from September 2003. It is understood that license to an private operator for GSM based mobile services has also been awarded by NTA. To take care of telecommunications for the rural sector exclusively, a separate license has also been awarded to a private company.

As the telecom market grew and need for further thrust for Universal Access, Universal Service Obligation, development of telecom for corporate & for IT, tele-medicine, tele-education and e-governance was felt, multi-operator regime depending upon spectrum availability became inevitable. HMG, therefore, brought out Telecommunications Policy 2060 (2004) to address these issues thereby paving the way for multiplicity and perhaps convergence.

The wireless based telecom services are best suited for this country having large hilly areas or congested cities like Kathmandu where laying of underground cables is extremely difficult and expensive. The potential advantages of unwiring the local loop or going wireless are comparatively low investment, speed with which phones can be provided, extremely low outages, ease of maintenance and security. The existing technologies for wireless telecom services are CDMA, GSM, DECT, PHS, GMPCS and others. However, whatever might be the technology, the wireless based communication invariably will have mobility component and restricting the same is like controlling the uncontrollable.

While multi-operator regime is must, the question is as to when it should be implemented. The telecom reforms in Nepal, though delayed, are faster as compared to many other countries. Competition is a must for availability of telecom services of high quality at affordable prices. Initially, it is better to go for a limited competition, as unlimited competition in the beginning may lead to the unhealthy practices, price war, viability of operations etc. A large number of countries first introduced competition in a limited way with two operators in both basic as well as cellular services. Same is the case with Nepal as here also the limited competition was introduced with concept of one operator in the basic services and cellular in addition to Nepal Telecom – the incumbent state operator. India, during the beginning of reforms opted, for fixed license fees and with its own experience found the revenue share concept more suitable for development of the new entrants. Nepal, perhaps rightly went for the revenue share concept. After introducing duopoly, various countries gave enough time to stabilize the market with limited competition before opening up for unlimited competition where number of operators are decided by the factors such as demand potential and other economic aspects. Perhaps, Nepal should adopt the same model and continue with the duopoly for some years till the market matures.

One thing, however, is certain. The monopoly based system for telecom services which has dominated the world’s telecom markets for over one hundred years continues to decline in popularity. The reforms are encouraging competition and competition is moving towards becoming dominant mode of telecom service supply. There are many factors which affect competition. NTA – the regulator-needs to be vigilant in order to combat the effects of expected and unexpected roadblocks. It is easy to stifle competition unilaterally. It is worthwhile looking at the experiences of other countries. When it comes to regulating the telecom sector, great emphasis be placed on mechanisms which ensure the maximum level of competition. This will prove to be beneficial for telecom consumers, operators and market.