ARTICLE IN PRESS

Contents lists available at ScienceDirect

Telecommunications Policy

Telecommunications Policy 33 (2009) 207–214

0308-59

doi:10.1

� Tel.

E-m

URL: www.elsevierbusinessandmanagement.com/locate/telpol

The landlocked island: Information access and communicationspolicy in Nepal

Robin Shields �

Department of Education, London Metropolitan University, 166-220 Holloway Road, London N7 8DB, UK

a r t i c l e i n f o

Keywords:

Nepal

Telecommunications

Information access

Competition

Rural development

61/$ - see front matter & 2008 Elsevier Ltd. A

016/j.telpol.2008.12.001

: +44 20 8639 0451.

ail address: rshields@ucla.edu

a b s t r a c t

This paper examines information access in Nepal, its current limitations, and

opportunities for expansion, particularly in rural areas. It argues that government

policies and the regulatory environment have failed to create the competition necessary

for rapid expansion of information access through information and communication

technologies (ICTs), particularly in rural areas. Furthermore, restrictive approaches to

licensing and exorbitant fees have hindered the ability of civil society organizations,

non-governmental organizations (NGOs), and small and medium enterprises (SMEs) to

provide information access at the local level. This has resulted in very limited access to

information outside a few urban centers and created some of the world’s highest access

costs in one of its poorest countries. To successfully address this situation, the newly

installed republican government will need to create an environment that promotes

competition in less lucrative rural markets while negotiating the demands of existing

license holders.

& 2008 Elsevier Ltd. All rights reserved.

0. Introduction

This paper examines information access in Nepal, its current limitations, and opportunities for expansion, particularly inrural areas. It argues that government policies and the regulatory environment have failed to create the competitionnecessary for rapid expansion of information access through information and communication technologies (ICTs),particularly in rural areas. Furthermore, restrictive approaches to licensing and exorbitant fees have hindered the ability ofcivil society organizations, non-governmental organizations (NGOs), and small and medium enterprises (SMEs) to provideinformation access at the local level. This has resulted in very limited access to information outside a few urban centers andcreated some of the world’s highest access costs in one of its poorest countries. Nevertheless, planning and policydocuments continue to advocate ICT as a cornerstone in the country’s development strategy. To successfully address thissituation, the newly installed republican government will need to create an environment that promotes competition in lesslucrative rural markets while negotiating the demands of existing license holders.

1. Background and theory

The importance of information access to development was first studied by modernization theorists such as Schramm(1964), Lerner (1958), and McClelland (1961). They measured relatively high correlations between the presence of mass

ll rights reserved.

ARTICLE IN PRESS

R. Shields / Telecommunications Policy 33 (2009) 207–214208

media and economic growth, positing information access as a key requirement for a modern or ‘‘achieving’’ society.At roughly the same time, Machlup (1962), Drucker (1968), and Bell (1974) developed the closely related concepts of the‘‘information society’’ and the ‘‘knowledge economy,’’ predicting that an increasing share of social and economicrelationships would center on the production and transfer of information rather than material goods. For many countries,this prescribed integration into global knowledge networks as a path to high growth rates, a view that has supporteddevelopments such as the explosive growth of technology industries in East Asia’s ‘‘four tigers’’ and the rise of India’ssoftware industry (Ashton, Green, James, & Sung, 1999; Heeks, 1996).

More recent research has problematized this assumption, showing that the relationship among information technology,information access, and development is often complex and convoluted. While the presence of ICTs and network access isgenerally necessary for information access, it is certainly not sufficient (Hudson, 2006). Rather, widespread access toinformation is contingent on a number of contextual factors, which may include literacy, free press, and stable governance.Additional complexity lies in the fact that the direction of causality (if any) between information access and development isunclear (Oyelaran-Oyeyinka & Lal, 2005; Ramı́rez & Richardson, 2005); while the two may be correlated, there is nothing tosay that expanded information access is not an outcome of development rather than its cause. Finally, the importance oflegacies peculiar to a given country and other context-specific issues cannot be understated; forming broad theories on therelationship between information access and development has little meaning if virtually every case is an exception to therule (Mansell, 1999).

This paper looks at information access as what Amartya Sen terms an ‘‘entitlement,’’ meaning the ‘‘commodity bundlesthat a person can command in a society using the totality of rights and opportunities that he or she faces’’ (Sen, 1983,p. 754). Sen shows how entitlements are as much a result of political rights and social empowerment as they are aconsequence of economic wealth and income. For instance, low-income individuals in Cuba might be able to access similaror even better health care than individuals in the United States with much higher incomes (due to the state role in healthcare provision). In this case, those individuals in Cuba with access to health care would have greater entitlements than theirmore wealthy counterparts in the United States without health care access. What is at issue is not the monetary cost of anentitlement but the totality of resources (e.g. wealth, political power, etc.) needed to acquire it in a given social context.

This concept of entitlements can easily be applied to information; the cost of access to information in a given context isfar more contingent on the political and social environment than on its natural price (i.e. the sum of the costs that arerequired to provide it). Variations in the price of broadband illustrate this phenomenon well; in India the price of abroadband internet connection is less than $7.50 (250 Indian rupees) per month in many areas, while in many areas ofNepal a much slower connection could cost more than $50 (3500 Nepali rupees) per month. Although some of thisdifference may be attributable to India’s large market size, the great majority is due to exorbitant licensing fees that are setby Nepal’s government and eventually passed on to the end user. Thus, access to information is restricted not because it isintrinsically expensive or limited, but simply because it has been set a premium in a given context.

Even when defined as an entitlement, information access is a nebulous concept whose meaning and value dependlargely on the type of information involved and how it is accessed. The very notion of a knowledge economy implies thatdifferent types of information are not equal and therefore command different prices; yet international developmentresearch often does not reflect this complexity. Rather, information access is interpreted narrowly to include onlyapplications considered relevant in the development context. Literature on the subject abounds with innovative methodsto supply rural fisherman and farmers with prices from local markets, but information from other domains (e.g.international news, stock market prices, or blogs) is considered irrelevant. This situation is complicated by the fact thatindicators and measurement of information access as a distinct phenomenon are limited, and researchers are required tofall back on proxy indicators such as telephone subscriber rates and internet users.

2. Overview of the Nepali context

By all accounts, access to information is limited in Nepal: Its telephone subscriber rate of 6.4% (mobile and fixedcombined) is the 15th lowest in the world and fourth lowest in Asia, outranking only East Timor, Papua New Guinea, andBurma (International Telecommunication Union—ITU, 2008). While privatization has brought some gains, increasingsubscriber rates from just 1.3% in 5 years (ITU, 2008), they are offset by the great rural/urban divide. In many rural areasthere is less than one line per 1000 people, and in two of the country’s 75 districts there is no service whatsoever. For muchof the rural population, the nearest telephone is over 10 km away (Shields, 2006). Even shared or community-level accessprograms (e.g. telecenters and public call offices—PCOs) have little chance for success in such circumstances.

The country’s rugged terrain and low levels of personal income provide a convenient excuse for those seeking an easyexplanation for the lack of access. However, this argument is ultimately shortsighted, as countries with similar constraintshave managed to rapidly expand telecommunications access through well-formed policies and licensing (Ibarguen, 2003).Nearby Bangladesh shares Nepal’s low personal incomes (albeit with a much higher population density), but it enjoyssubscriber rates nearly four times higher (22.41%; ITU, 2008). Neighboring states in India (Sikkim, Uttarakhand, andHimachal Pradesh) share the country’s rugged landscape but also benefit from considerably better connectivity. Whilelimited economic resources and the challenging mountainous landscape do pose challenges to information access, they

ARTICLE IN PRESS

R. Shields / Telecommunications Policy 33 (2009) 207–214 209

alone do not explain the comparatively poor availability of information in Nepal, prompting an investigation of political andsocial factors.

Within the national government, the Ministry of Information and Communications (MoIC) and the Ministry of Scienceand Technology (MoST) are responsible for policies relating to information access. The former is concerned mainly withissues of licensing, infrastructure, and regulation while the latter deals with social issues of information access, researchingusage patterns, and e-governance services. The Nepal Telecom Authority (NTA) was created as the country’s independentregulator in 1997 and is responsible for all telecommunications licensing as well as oversight of the RuralTelecommunications Development Fund (the national universal access fund).

The private sector is dominated by Nepal Doorsanchar Company Limited (more commonly known as Nepal Telecom orNTC), the incumbent operator that was nominally privatized in 2004 and provides fixed, mobile, and internet service.However, the company’s status as a bona fide private company is dubious: Its chairman also serves as the secretary of theMoIC, suggesting close ties with the government. Two other major operators, Spice Nepal and United Telecom Limited(UTL), offer mobile and fixed service, respectively, while a number of smaller operators are licensed to provide ruraltelephony and other specialized services via satellite. Internet service is provided by no less than 35 different companies(NTA, 2008a), mainly using dial-up but increasingly through Wi-Fi and other open spectrum technologies. 2008 also sawthe launch of ADSL internet service by NTC; following the pattern of rural exclusion, service is limited to Kathmandu and itsimmediate suburbs.

Due in part to the size of the international development community in Nepal, civil society organizations and NGOs haveundertaken a number of initiatives to expand access in rural areas. The role of civil society in promoting information accesshas a history dating to the establishment of innovative community radio stations and village newspapers in the 1990s(James, 2005; Kasajoo, 2008). More recently, the telecenter has become a popular programming model, and numerousNGOs have implemented variants on the basic concept. Interest in telecenters was picked up by policy makers as illustratedby the Tenth five-Year Development Plan (Nepal Planning Commission, 2002), which calls for the creation of 1500telecenters. However, their success and sustainability have been limited, mainly because of poor telecommunicationsaccess and high access costs.

3. Policy and regulation

In relation to most other countries in the region, ICT policy in Nepal has remained relatively restrictive and centralized.Limitations imposed during the country’s decade-long ‘‘People’s War,’’ instability at the highest levels of government, andendemic corruption have precluded the possibility of expanded access. However, recent policy changes such as the removalof licensing requirements for the industrial, scientific, and medical (ISM) frequency bands may hint at a forthcoming easingof restrictions and removal of prohibitive licensing fees. Such changes will be contingent on the support of the newgovernment, which will likely be led by the Maoists following their strong showing in recent constituent assemblyelections.

3.1. Policy history

Policies on information and communication in Nepal date to the Radio Act of 20141 (1957), which established the needfor radio transmitter licenses and designated the central government as the issuing authority. However, the development ofmodern ICT policy began with the Telecommunications Act of 2053 (1997) and the Telecommunications Regulation of 2054(also in 1997). The former policy created the Nepal Telecom Authority and established its authority to collect license feesand enforce telecommunications policy, while the latter described the licensing procedure and fees, requirements forinterconnection, and stipulated that at least 15% of licensee’s investments must go towards service in rural areas.

These were followed by the Information Technology Policy of 2057 (2000); the country’s first foray into the globalinformation economy, the policy called for increased private sector participation and ‘‘computer education for all’’ by 2010.More recently, the Telecommunication Policy of 2060 (2004) converted NTC into a private company, required increasedtransparency in licensing, more private sector participation, and reduced import duties on telecommunications equipmentfor deployment in rural areas.

Since the reinstatement of parliament in 2006, several new policy decisions have created the potential for furthergrowth and transparency in Nepal’s ICT sector. These include the removal of licensing restrictions on certain radiofrequencies (as specified by the International Telecommunications Union), legalizing internet telephony (Voice overInternet Protocol, or VoIP) for domestic use, and establishing the High-Level Media Commission to study the media sectorin Nepal and report its recommendations directly to the prime minister.

Thus, policy in Nepal has followed the global trend towards privatization and autonomous regulation advocated by theWorld Bank and other international institutions (Wallsten, 1999). More recently, this has been complemented by openinglicense-free spectrum bands and deregulating VoIP technology for domestic use. However, implementation of these

1 Dates in policy titles use the Nepali calendar, which is approximately 57 years ahead of the Gregorian Calendar with a new year beginning in mid-

April. Gregorian dates are given in parentheses for reference.

ARTICLE IN PRESS

R. Shields / Telecommunications Policy 33 (2009) 207–214210

changes has lagged considerably behind the rest of the region and ultimately has done little to expand information accessin many rural areas. Much of this lack of success is attributable to features of the regulatory environment.

3.2. Licensing and regulation

Despite steps to make ICT licenses simple and transparent, most of NTA’s licensing regime remains convoluted,inaccessible, and expensive by regional standards. This results in less competition and higher overhead, ultimately raisingcosts for consumers and impeding access to information. The 15 licenses regularly issued by NTA cover a variety of servicesranging from internet service providers to prepaid calling cards. Additionally, two ad hoc licenses have been issued to SpiceNepal, Ltd. and United Telecom, Ltd. for GSM mobile and ‘‘fixed’’ wireless (through CDMA) services, respectively. Costing$2.84 million for Spice Nepal and $1.3 million for UTL, the licenses contain the following key provisions:

�

no competitive licensees will be issued for 5 years, and then only if there is a demonstrated need, and � 15% of the operators’ investments will be directed to service in rural areas.

The licensing process was far from transparent, and the large stake in Spice Nepal initially held by former kingGyanendra’s son-in-law hints at Nepal’s endemic corruption (Shields, 2006). Other aspects of the licensing terms haveapparently been disregarded or ignored; UTL was licensed to provide only fixed-line service but now provides mobileservice, too. Both licenses contained a stipulation that 15% of total investments be directed towards rural users, althoughthere is no mechanism for measuring or enforcing the requirement.

NTA also manages the Rural Telecommunications Development Fund, which requires all telecommunication companieswith annual revenues over $30,000 to pay 2% of their gross receipts into the fund to expand rural access. Although thefund’s value exceeds $230,000 (NTA, 2007), its assets remain unused to date, a subject that has created controversy andraised the suspicion of corruption. In part to ameliorate such allegations, NTA recently established a committee toadminister the fund and put forth a consultation paper on the subject. While the effectiveness of universal access funds hasbeen contested (Clarke & Wallsten, 2002), the current practice of collecting a universal service fee without investing inexpanded access seems doomed to failure.

Another of NTA’s key responsibilities is to regulate interconnection; guidelines were put into place in May 2008 thatrequire all providers to offer interconnection on a non-discriminatory basis and that interconnection agreements are filedwith NTA. While such provisions are of limited use in a market of three competitors in which the incumbent controls over65% of the market, the guidelines do provide a foundation for further competition in the sector if more licenses are issued.However, issues of network access are still problematic, as demonstrated through their recent legal battle to offer ADSLaccess over NTC’s fixed-line network.

Currently, nearly all ISPs in Nepal access international traffic through satellite (VSAT), one of the most expensive optionsavailable. To do so, they must first pay the 2.5 million rupee ($37,000) VSAT Network Provider license fee, which allowsthem to purchase VSAT service from satellite operators in India, Indonesia, and Hong Kong, in addition to paying 250,000rupees ($3700) per dish installed and obtaining a 300,000 rupee ($4400) ISP license (NTA, 2008a). The result is thatinternational internet traffic is constricted and expensive; currently the total internet download capacity of the country isonly 116 Mbps (NTA, 2008b).

Recent developments in the internet service market hint at an opening of the national bandwidth bottleneck but alsocreate the possibility for serious disputes over network access. In 2008, NTC launched an ADSL service over its fixed linesthat which threatened to make the services of other ISPs (who rely on either dial-up connections or their own wirelessnetworks) uncompetitive. ISPs responded by filing a complaint against NTC, arguing that the use of its fixed-line network toleverage its internet service business while not allowing other ISPs network access was anti-competitive, a position thatwas upheld in NTA’s ruling. NTC’s recent construction of an international fiber optic connection with India may create asimilar impasse; the network will greatly improve internet access speeds and may soon make reliance on VSATunnecessary. However, there is no mechanism for competitors to access the network, nor is there a clear licensing structurefor them to build their own. Until the regulator creates and enforces clear interconnection guidelines that offer ISPs accessto long-distance and high-bandwidth networks, growth of the internet service sector will be limited and heavily biased infavor of NTC.

4. Private sector

While other countries in the region have experienced rapid growth and a dramatic drop in tariffs, Nepal’s relativelyclosed and uncompetitive telecommunication sector remains limited and expensive by regional standards. The situationwas made worse by the decade-long ‘‘People’s War,’’ which destroyed much of whatever limited infrastructure existed inrural areas. However, with the deployment of new technologies and increased competition, the situation may begin toimprove in the near future.

ARTICLE IN PRESS

R. Shields / Telecommunications Policy 33 (2009) 207–214 211

4.1. Telephony market

Until recently, state-owned NTC was the sole provider of telephone service in the country. It continues to enjoy a numberof special privileges, including implicit exemption from licensing requirements. Nominally converted into a private companyby the Telecommunication Policy of 2060 (2004), NTC dominates the telecommunications market, providing fixed-line,mobile, internet, and data services. It remains the only provider of fixed-line telephone service, which reaches 73 of Nepal’s75 districts. However, in many districts only one or two urban population centers are connected, and aging infrastructurelimits the usefulness of the network for data transmission and internet access. Furthermore, in many areas the full capacityof the network is almost completely allocated, meaning that expanding service or obtaining a new line is difficult. As a resultof these challenges, the future of NTC is wireless; using CDMA technology it plans to expand limited mobility phone serviceby 1 million lines in the near future and cover every district. NTC is also the largest mobile operator in the country in termsof both users and network coverage, with 1,493,269 subscribers and coverage in 43 districts (NTA, 2008b).

The remainder of the telephone service market in Nepal is effectively divided between two private operators: SpiceNepal and United Telecom Limited. Spice Nepal, which does business as Mero Mobile (My Mobile), is the second largestoperator with 1,006,855 subscribers (NTA, 2008b). However, its network is smaller than that of NTC, covering 34 districtsand often only urban and peri-urban areas within the districts. Although its original license was only for fixed-line service,UTL now offers both fixed-line and mobile service using CDMA technology. Its coverage is limited to the Kathmandu Valleyand four other districts with a total of 105,694 subscribers (NTA, 2008b).

In addition to the main telecommunications providers, several smaller companies offer specialized services in ruralareas. Operating as the nation’s only licensed rural telecommunication service, STM Telecom uses VSAT technology tooperate public call offices in rural areas. To date, it has created 2138 PCOs (NTA, 2008b), offering services ranging from basictelephone to internet and telemedicine. Two smaller companies provide access to rural areas using Global Mobile PersonalCommunication by Satellite (GMPCS) technology, with a combined subscriber base of 1400 (NTA, 2008b). While theseservices are too expensive for most rural users and account for a tiny fraction of market share, they are valuable foremergency situations and other specialized usage.

4.2. Internet service market

In contrast to the market for telephone service, Nepal’s internet service sector is vibrant and competitive. NTA (2008a)lists 35 licensed ISPs with a total of 83,070 registered accounts (NTA, 2008b). However, this figure almost certainlyunderestimates the number of actual users due to the popularity of cyber cafes and other shared access systems; a 2005report by HLCIT estimates the total number of internet users at 200,000.

ISPs have faced challenges on two fronts: expensive international connections and limited domestic infrastructure. Thefirst of these stems from ISPs’ reliance on expensive satellite technologies (VSAT). While global fiber optic networks offervirtually unlimited bandwidth, Nepal relies heavily on satellite connections for international communications. Bandwidthon these networks connections is exponentially more expensive than fiber optic connections, a situation that is not helpedby the relatively poor satellite coverage in the area and the high licensing fees. Thus, the country suffers an international‘‘bottleneck’’ as all traffic going in and out must be passed through the same limited bandwidth (presently 170 Mbpscombined uplink/downlink). NTC’s recently constructed fiber optic connections with India may improve the situation, butat present there is no provision for interconnection. Consequentially, the incumbent operator will have free reign to chargealmost any amount for access to its own network, and prices will likely remain high.

On the domestic front, ISPs must deal with a lack of infrastructure that which makes service delivery problematic. Dueto the poor signal quality of NTC’s fixed-line network, dial-up (the least costly form of internet access) is often difficult orimpossible in many regions of the country; furthermore many areas have no phone service whatsoever, making internetaccess all but impossible. The growing mobile phone network presents one possible solution; NTC now offers internetaccess over its CDMA network, and both mobile operators offer data service through GPRS. However, smaller ISPs must findtheir own solution; this has often meant creating ad hoc networks using a combination of consumer-grade wireless andwired technologies, which requires significant capital and expensive maintenance, adding to overhead and raising usercosts still higher.

Although competition in the internet service market is fierce, Nepali ISPs have been successful at finding a commonground for collaboration, creating the Nepal Internet Exchange (NpIX), a cooperative interconnection that ensures domesticinternet traffic stays within the country. Before the advent of the NpIX, the internet traffic for a Nepali user accessing awebsite hosted in Nepal might have been routed through India, Hong Kong, or Indonesia. This utilized bandwidth onexpensive international connections, resulting in network congestion and a compromised user experience. The NpIX ensuresthat domestic internet traffic remains within the country, which ultimately reduces costs and improves transfer speeds.

5. Civil society

Given the strong presence of the international development community in Nepal, civil society and NGOs also play animportant role in expanding access to information, particularly in rural areas, where private sector services are lacking.

ARTICLE IN PRESS

R. Shields / Telecommunications Policy 33 (2009) 207–214212

Even before modern ICTs (e.g. computers and the internet) were widely available, civil society utilized other media such ascommunity newspapers and FM radio in their programs (Kasajoo, 2008). The latter remain popular even today, with theCommunity Radio Support Centers counting at least 28 in operation throughout the country (CRSC, 2006). The oldest ofthese, Radio Sagarmatha, has become one of the most popular stations in the country (James, 2005). Unfortunately, due tothe lack of an official legal categorization for community radio stations, they are forced to pay the same licensing fees ascommercial stations, which can be up to $3000.

Following the global fad of the telecenter as a model for information access, a number of NGOs have set up telecenters invarious parts of the country. These offer a set of common services (e.g. internet access, telephone, fax), often runeducational programs (e.g. basic computer classes), and are usually managed by a committee elected by the localcommunity. However, a number of external challenges limit the capacity of telecenters in rural areas. Where present,electrical power is unreliable and subject to surges that can damage computers; most telecenters need to install batterybackup systems and some are powered by solar panels or generators. Internet access is also a challenge; obtaining a phoneline for dial-up service may be difficult or impossible in many rural areas, while poor line quality can result in an unreliableconnection. Even where a line is available, a call to the nearest ISP may be charged at long-distance rates, making accessprohibitively expensive.

Other organizations have integrated features of the telecenter into other programming models, often combiningtraditional media with new ICTs and internet access. Community libraries provide one example, offering print media (i.e.books, newspapers, and magazines), audio-visual content, and internet access. It is difficult to know the exact number ofthe community libraries in Nepal as there is no official registration process; based on reports of NGOs working in this fieldthere are at least 39 in operation across the country.

While research has shown that telecommunications access is within the economic grasp of the poor (Kayani & Dymond,1997), the combination of low incomes with some of the world’s highest costs of information access poses a challenge thateven well-run civil society organizations and NGOs cannot surmount. The success of community-level programs isconstrained by the macro-level environment regardless of how well the program is implemented. For example, operatingcosts for a rural telecenter (internet access, electricity, etc.) can easily run up to $250 per month. Since most of the localpopulation earn only $1–$3 per day, the access fees that a telecenter must charge to meet its own costs are well beyondwhat most users are able to pay. In other areas where the nearest telephone is up to a day’s walk away, the idea oftelecenters is next to impossible. Until these larger issues are resolved, it is difficult to see how the government will reachits goal of 1500 rural telecenters (Nepal Planning Commission, 2002).

6. Analysis and recommendations

Following global trends and advice of the World Bank and other international institutions (Wallsten, 1999), Nepal hasnominally privatized its national operator and created an independent regulator. However, this has been done in asuperficial manner that pays lip service to the ideology of privatization rather than creating true competition. As a result,information access is limited throughout the country, particularly in rural areas. In order to truly address the great dividebetween urban and rural information access, the new government will need to seriously restructure the telecommunica-tion sector, including the removal of long-standing, vested interests.

The experiences of other low-income countries, particularly neighboring India, show that innovative and contextualizedapproaches to licensing can quickly expand access to telecommunications and information. For instance, when the Indiangovernment restructured the telecommunication sector in 1994, it created 18 geographic licensing zones throughout thecountry (Jain, 2006); each license was issued through a separate tender process with clearly defined selection criteria,including a 15% weighting for rural expansion (Sinha, 1996). This approach produced maximum license revenue for high-density, lucrative urban markets while ensuring that competitive forces expanded access in rural areas. Encouragingforeign direct investment (FDI) also ensured that the licensees had the necessary investment capital and technical capacityto fulfill the terms of the license.

Directly transferring this approach to Nepal would be challenging; nearly all of India’s 18 licensing zones were larger(and wealthier) than the entire country of Nepal. However, rethinking the national licensing strategy, particularly in respectto the rural and urban market, could go a long way in improving rural information access. The lack of coverage in ruralareas shows that current licenses are underutilized. While operators paid for a nation-wide license, they currently utilizeonly part of this scope; the rest of the license is essentially wasted. While national operators try to recoup the licensing feesthrough investments in urban markets, smaller operators are unable to enter the market due to the 5-year protectionperiod. While not an exhaustive list, new approaches to telecommunications licensing might include:

Issuing additional licenses: The 5-year protection period for both private operators is nearing expiration. The lack of ruralaccess should be taken as proof that more licenses are required. However, in issuing new licenses the NTA shouldcarefully consider new approaches to licensing, such as back-end royalties instead of lump sum fees (McDowell & Lee,2003), or separating licenses for infrastructure and services.Enforcing licensing requirement for rural investments: The requirement that 15% of operators’ investments be directedtowards rural areas has no enforcement mechanism. While operators may point to access in peri-urban areas as proof

ARTICLE IN PRESS

R. Shields / Telecommunications Policy 33 (2009) 207–214 213

that the requirement has been met, this is ultimately superficial and leaves remote rural areas without access. Clearguidelines for fulfilling and enforcing this requirement are needed. For example, licenses issued under India’stelecommunication reform stipulated a heavy penalty of 66 Indian rupees (approximately $2) per day for each promisedrural line that was not installed (Sinha, 1996). The clear definition of a measurement mechanism and correspondingfinancial consequences created the pressure necessary to expand access to rural areas.Unbundling Nepal Telecom: Nepal Telecom is able to leverage its implicit exemption from licensing requirements incombination with its legacy infrastructure to effectively stifle competition in the market. Would-be competitors canneither launch their own services nor obtain interconnection from NTC, confirming Gillwald’s (2005, p. 485) assertionthat, ‘‘incumbent operators use interconnection as one of their primary weapons against new entrants andcompetitors.’’ Separating NTC into separate fixed, mobile, internet service, and long-distance/fiber optic businessesthat operate and interconnect with other operators on equal terms would greatly improve competition and theeffectiveness of market forces.Encouraging licensees to subcontract rural service provision: Existing licensees have concentrated on a few urban marketsand essentially left the national scope of the license unused in many rural areas. The regulator should allow andencourage the licensees to subcontract the license in these areas, particular to SMEs that could function efficiently inrelatively limited rural markets.

Additionally, abandoning excessive licenses fees that primarily target SMEs (e.g. ISPs and VSAT users) would makeexpansion to rural areas a cost-effective proposition. While this requires forgoing a lucrative stream of governmentrevenue, it would quickly yield returns in enhanced communications with rural areas and associated economicproductivity. Given that the government currently spends hundreds of millions of dollars in fuel subsidies each year (Owen,2008), the lost licensing fees might well be recouped through a reduction in travel to and from rural areas.

Returning to Sen’s concept of entitlements, an individual’s ability to access information is determined by his ‘‘totality ofrights and opportunities’’ (Sen, 1983, p. 754). While this includes economic resources, it also includes political rights. Theconstraints on information access in Nepal are more a result of the restrictions and poor planning of a self-interestedgovernment than limitations in technology and resources. While the government has adopted reform measures using anaccepted strategy of privatization and independent regulation, it has licensed very few private operators, and even licensedoperators have a very weak position when compared to the national incumbent. What is most lacking in the Nepalitelecommunication sector is competition, particularly for rural markets. In order to truly expand information access incoming years, the government will need to take a nuanced approach for licensing and regulation that controls marketforces to create competition in rural areas.

Whether the newly formed consensus government, led by the recently mainstreamed Maoists, will be able toaccomplish this difficult task remains to be seen. While they were able to end the rule of an absolute monarch, breaking updeeply engrained power structures at lower levels of the government bureaucracy may prove to be more difficult.Furthermore, privatization, competition, and the breakup of government enterprises are arguably at odds with the Maoistideology of a highly centralized, state-led economy. However, the Maoists’ pro-active approach to rural development andtheir own tradition of adopting new technologies leave some room for optimism.

7. Conclusion

In a comparative context, the experience of Nepal illustrates the importance of competition, which has been articulatedin other research in developing countries (Garbacz & Thompson, 2007; Gillwald, 2005; Hodge, 2005). Clearly, privatizationis not enough to create this competition; liberalization through licensing of additional service providers is also required.Perhaps more importantly, creating a licensing strategy that accommodates the peculiarities and uniqueness of thenational context (i.e. differences between rural and urban markets, geographic factors, etc.) can enhance this competition.Finally, lowering or removing license fees targeted at smaller companies (i.e. ISPs) ultimately benefits the country throughimproved access.

Unfortunately, telecommunication reform in Nepal has included few of these measures. Issuing a national license forone private operator in the fixed and mobile service markets has done little to create competition in rural areas, as there islittle incentive for licensees to expand into low-income rural areas while urban markets can be deepened with littleadditional investment. Interconnection, which Frempong and Atubra (2001, p. 208) call ‘‘the bane’’ of telecommunicationreform, remains problematic; the dominant nature of the incumbent and limited number of licensees biases the terms ofinterconnection, while smaller providers (particularly ISPs) still have trouble accessing the incumbent’s network. Finally,exorbitant licensing fees, which are more in the interests of the government than its people, inhibit the growth of smallerorganizations and remove the incentive for expansion to low-income and rural markets. The combination of these factorshas made a nation landlocked between two telecommunications giants, India and China, as isolated as a remote island interms of its information access. Lowering barriers to information access, particularly by adopting policies and licensingmechanisms that promote expansion in rural areas, can make bringing widespread information access a reality even inNepal’s most far-flung regions.

ARTICLE IN PRESS

R. Shields / Telecommunications Policy 33 (2009) 207–214214

Acknowledgments

The author would like to thank Gaurab Upadhaya and two anonymous reviewers for their input and suggestions. Anyerrors are his own.

References

Ashton, D., Green, F., James, D., & Sung, J. (1999). Is there a ‘‘Four Tigers’’ model of skill formation? In Education and training for development in East Asia: Thepolitical economy of skill formation in East Asian newly industrialized economies. ESRC Pacific Asia Programme Series. Lancaster: Economic and SocialResearch Council.

Bell, D. (1974). The coming of post-industrial society: A venture in social forecasting. London: Heinemann.Clarke, G. R. G., & Wallsten, S. J. (2002). Universal(ly bad) service: Providing infrastructure services to rural and poor urban consumers. World Bank Policy

Research working paper 2868.Community Radio Support Centre (2006). Radio directory. Kathmandu: Nepal Forum of Environmental Journalists.Drucker, P. (1968). The age of discontinuity: Guidelines to our changing society. New York: Harper & Row.Frempong, G. K., & Atubra, W. H. (2001). Liberalisation of telecoms: The Ghanaian experience. Telecommunications Policy, 25, 197–210.Garbacz, C., & Thompson, H. G., Jr. (2007). Demand for telecommunication services in developing countries. Telecommunications Policy, 31, 276–289.Gillwald, A. (2005). Good intentions, poor outcomes: Telecommunications reform in South Africa. Telecommunications Policy, 29, 469–491.Heeks, R. (1996). India’s software industry: State policy, liberalisation and industrial development. New Delhi: Sage Publications.HLCIT (2005). A factbook on information and communications technology sector of Nepal (sic). Kathmandu: High Level Commission on Information

Technology.Hodge, J. (2005). Tariff structures and access substitution of mobile cellular for fixed line in South Africa. Telecommunications Policy, 29, 493–505.Hudson, H. E. (2006). From rural village to global village: Telecommunications for development in the information age. New York: Routledge.Ibarguen, G. (2003). Liberating the radio spectrum in Guatemala. Telecommunications Policy, 27, 543–554.International Telecommunication Union (2008). World telecommunication/ICT indicators database. Geneva: Author.Jain, R. (2006). Interconnection regulation in India: Lessons for developing countries. Telecommunications Policy, 30, 183–2000.James, J. (2005). Technological blending in the age of the internet: A developing country perspective. Telecommunications Policy, 29, 295–296.Kasajoo, V. (2008). Pro-people media: Alternative media for rural people. Retrieved from /http://kasajoo.com/pro_e_alternative.phpS on December 9, 2007.Kayani, R., & Dymond, A. (1997). Options for rural telecommunications development. World Bank technical paper no. 366. Washington, DC: World Bank.Lerner, D. (1958). The passing of traditional society: Modernizing the Middle East. Glencoe: The Free Press.Machlup, F. (1962). The production and distribution of knowledge in the United States. Princeton: Princeton University Press.Mansell, R. (1999). Information and communication technologies for development: Assessing the potential and the risks. Telecommunications Policy, 23,

35–50.McClelland, D. C. (1961). The achieving society. Princeton: Van Nostrand.McDowell, S. D., & Lee, J. (2003). India’s experiments in mobile licensing. Telecommunications Policy, 27, 371–382.Nepal Planning Commission (2002). Tenth five year plan. Kathmandu: Author.Nepal Telecommunications Authority. (2007). Management Information System Report. Vol. 16.Nepal Telecommunications Authority. (2008a). Management Information System Report. Vol. 20.Nepal Telecommunications Authority (2008b). Quarterly Performance Indicator (sic) of Telecom Service/Sector, Vol. 2.Owen, N. (2008). Fuel subsidies take a toll on Nepal economy. International Herald Tribune. Retrieved September 14, 2008 from /http://www.iht.com/

articles/2008/06/29/business/renepal.phpS.Oyelaran-Oyeyinka, B., & Lal, K. (2005). Internet diffusion in sub-Saharan Africa: A cross-country analysis. Telecommunications Policy, 29, 507–527.Ramı́rez, R., & Richardson, D. (2005). Measuring the impact of telecommunication services on rural and remote communities. Telecommunications Policy,

29, 297–319.Schramm, W. (1964). Mass media and national development: The role of information in the developing countries. Stanford: Stanford University Press.Sen, A. (1983). Development: Which way now? The Economic Journal, 93, 745–762.Shields, R. (2006). Information, communication, and communities in Nepal: A framework document. Kathmandu: UNESCO.Sinha, M. (1996). The political economy of India’s telecommunication reforms. Telecommunications Policy, 20(1), 23–28.Wallsten, S. J. (1999). An empirical analysis of competition, privatisation and regulation in Africa and Latin America. Policy Research working paper no. 2136.