May 7: The internet service provided by the big internet service providers (ISPs) of Nepal suddenly slowed down on the evening of May 2 while the country was observing the National Information and Communication Technology Day.

The main reason for the disturbance in the internet service was that India’s Airtel company, which was providing bandwidth to the internet service providers of Nepal, stopped providing the bandwidth. The Ministry of Communication and Information Technology said that the Indian company turned off the Internet link for about 6 hours after the ISPs of Nepal defaulted in payment for the bandwidth usage for the past one year.

In particular, the government has not provided foreign currency exchange facilities for the payment of bandwidth for the past one year because some ISPs have not fully paid the fee to be paid to the Rural Telecommunication Development Fund and the royalty to be paid to the government from the fees collected from the customers. As a result, they have not been able to pay the dues to the Indian company.

According to Internet Service Providers Association of Nepal (ISPAN), an umbrella organization of internet service providers operating in the country, Airtel is the company that provides the largest bandwidth to Nepal.

Seventy percent of the total bandwidth is being provided by Airtel, according to ISPAN. Due to this, the speed of the internet decreased significantly on last Thursday.

There has been a dispute between the government and the Internet Service Providers (ISPs) whether to consider the maintenance service provided by the ISPs as a telecommunication service or not and whether to pay a certain percentage of the fees collected by the ISPs to the Rural Telecommunication Development Fund and to the government as royalty.

The government has been considering maintenance as a telecommunication service and has been asking the ISPs to pay two-tier tax. In addition, the government has been refusing to provide foreign exchange facilities to those who do not pay such fees.

The ISPs have refused to pay taxes from maintenance fee claiming that the maintenance service does not belong to the telecommunication service according to the law and they do not have to pay the fee to the government. This dispute is currently pending before the Supreme Court. Even though the internet service was disrupted, both sides did not back down from their stance.

The Ministry of Communication and Information Technology issued a statement on May 2 and requested the ISPs not to act in such a way as to disrupt essential services like the Internet without paying the rural telecommunication development fees and royalties to the state on time.

Issuing a press statement the following day, the regulatory body Nepal Telecommunications Authority said that a certain number of internet service providers have not paid the due amount as per the rules despite repeated requests from the authority over the years under various pretexts, so it did not recommend foreign exchange facility to the defaulters.

What is the service provider's statement?

ISPAN claims that the ISPs have been regularly paying royalties and rural telecommunication development fees to be paid from income from telecommunication services in accordance to the Telecommunication Act, Telecommunication Regulations and Rural Telecommunication Development Fund Regulations.

Apart from that, there is no legal provision to pay royalties and rural telecommunication development fund fee from income generated from non-telecommunication services such as maintenance services.

“The state-owned service providers are easily getting recommendation for foreign currency exchange facility even though they have billions of rupees in arrears, which is a discriminatory policy of the government," said Subas Khadka, Chief Executive Officer of ISPAN, in a statement issued on Saturday.

ISPAN claims that the government cannot charge fees for the Rural Telecommunication Development Fund and royalties from the maintenance fees according to the instructions of the Public Accounts Committee of the Parliament, the decision taken by the Office of the Auditor General and the interim order issued by the Supreme Court.

What is the legal provision?

Section 2 (d) of Telecommunications Act 2053 defines 'telecommunication service' as service related to sound, sign, signal, writing, figure, any kind of secret signal or message whether or not such sound, sign, signal, writing has been rearranged, calculated or otherwise altered in any way for the purpose of emission, transmission or reception by electronic means using wire, radio, light (optical) or other electromagnetic system.

In schedule 6 (a) of the regulation, 13 areas have been considered as telecommunication services. Types of telecommunications services licensed include Internet (including email), fax, mail, VSAT, local data network (for commercial use), local telephone service, intra-nation trunk call service, international trunk call service, intra-nation telegraph service, international telegraph service, Telex service, leased circuit service, telefax service, package switching data service.

In the regulation, internet maintenance fee is not included under telecommunication service.

According to Santosh Paudel, the director of the NTA, the government has not published a notice in the Nepal Gazette and has not included the maintenance under the telecommunication service as liable for the rural telecommunication development fund. However, he claims that maintenance is also a telecommunication service and there is no need to publish a notice in the Nepal Gazette define it as telecommunication service.

"Since this matter has reached the court, we cannot say anything more," he said.

How much is due?

According to the NTA’s claim, nine ISPs are yet to pay dues worth Rs 3.70 billion. WorldLink is yet to pay Rs 1.94 billion while Vianet is yet to pay Rs 420 million.

Section 5 of the Telecommunications Regulations and the Rural Telecommunications Development Fund Regulations 2068 stipulates that the licensee must deposit 2 percent of the annual income collected from the telecommunications services into the fund every year.

Section 26 of Telecommunication Regulation 2054 explains that 'annual total income' means the income received by the licensee for providing telecommunication services, excluding the amount received from the customer, service tax, value added tax, etc.

According to these two provisions, the authority has maintained the arrears of unpaid tax from the amount collected by the ISPs under maintenance charge.

What did the parliamentary committee say?

After the Auditor General's 56th annual report pointed out that the ISPs had not paid royalty and rural telecommunication development fund fee from the fees collected from customers as maintenance services, this issue was discussed in the Public Accounts Committee of the House of.

The Public Accounts Committee explained that the support charge, annual maintenance fee, technical fee and monitoring fee collected by the ISPs are non-telecommunication services and decided to give instructions to remove the unnecessary charges and royalties for the Rural Telecommunication Development Fund.

What is happening in court?

On June 21, 2020, WorldLink filed a petition at the Supreme Court seeking an interim order not to charge additional fees related to royalty and rural telecommunication development fund fees.

The Supreme Court issued an interim order on June 23 in favour of the petitioner.

"Despite the fact that even the court has ordered the government not to take action until the case is settled, the government is torturing us again and again," Dilip Agarwal, president and managing director of WorldLink Communications, told New Business Age.

What is the solution?

According to ISPAN, Airtel denied bandwidth because the government has not provided the foreign currency exchange facility to the ISPs since the last 13 months. Airtel provided the bandwidth after about six hours following the assurance given by the NTA and the initiative taken by the ministry. According to ISPs, it is not certain when Indian companies will stop providing the bandwidth.

However, the government and internet service providers do not seem to budge from the respective stance.

Agarwal said that they are ready to proceed according to the court's order. The government wants to collect the outstanding amount. However, Paudel, the spokesperson for the NTA, also says that the court's decision will be important to solve this case. "Let's not say too much now, the court's decision will be the final decision," he said.