- 1 Definition / Scope
- 2 Market Overview
- 3 Key Metrics
- 4 Market Risks
- 5 Top Market Opportunities
- 6 Market Drivers
- 7 Market Restraints
- 8 Industry Challenges
- 9 Technology Trends
- 10 Pricing Trends
- 11 Other Key Market Trends
- 12 Market Size and Forecast
- 13 Competitive Landscape
- 14 Competitive Factors
- 15 Key Market Players
- 16 Strategic Conclusion
- 17 References
Definition / Scope
Internet services refers to Internet access through technologies including dial-up, DSL, ADSL, satellite (VSAT), wireless, leased lines, ISDN and mobile Internet access technologies such as GPRS, EDGE and 3G/HSDPA.
Internet Service Providers (ISPs) are also referred to as Internet access providers (IAPs). These are companies or businesses that provides access to the Internet and any other related services for a fee.
The various types of Internet Service Providers include:
- Companies specialising in being the intermediary between the Internet and the end user, that is, pure Internet service providers
- Fixed telecommunications service providers who use their infrastructure for data transmission and thus Internet access
- Mobile telecommunication service providers providing mobile Internet access technologies that allow users to access the Internet
- Power utility companies that have extra capacity in their cabling and utilise this to transmit data
To provide the internet services, the ISP provides the user with their individual IP Address which may be static or dynamic, to represent the device while accessing the internet.
In Nepal, the ISP’s have now evolved themselves as not only an internet service providers but as an IT company providing various services like data connectivity, network integration, consulting and security, web hosting and development, software development and system integration.
Nepalese ISP industry is growing rapidly. Unlike in the past, about 15 years ago, where there were little technological developments and the customers used the internet services only for general purposes like web browsing, sending and receiving emails through dial up services provided by very few ISP’s. Now, with the globalization, the manual based systems in all banks, government bodies, private companies are replaced by electronic systems and the need of the internet service providers is imminent.
Considering the timeline of 5 years from April 2013 to May 2018, the total number of internet subscribers in Nepal has increased from 85,817 to 426,317 which is about 400% rise due to the rapid technological growth in Nepal. This growth is also due rapid increase in the number of IT companies that provide individuals and organizations with services like web hosting and development and application developments.
Similarly, the increase in freelancing works for the developed countries like USA, Australia, England performed from underdeveloped countries like Nepal has also led to increase in use of the internet services.
Apart from these, the government policy of developing the various sectors of the country using the tools and techniques of the ICT will also led to the higher use of the internet services in Nepal.
|Base Year||2017||Researched through internet|
The various market risks associated with the internet service provider industry in Nepal are mentioned below:
- Apart from the city and urban areas, the literacy rates in the rural regions of Nepal are still very low. People are unable to use the internet and mobile devices. In such consequence, developing the network of any ISP over the rural areas can be risky. The cost associated with the extension may be far less from the benefits gained for any ISP. ISP industry still today is somewhat concentrated in the urban areas.
- Being the state owned telecommunication organizations, NTC is trying to lower the cost of internet and telephone services in Nepal upgrading systems. Thus, due to this the customers of other ISP are taking service from NTC. So, a new organization trying to enter in the market may find it risky due to the prices and services offered by NTC.
Top Market Opportunities
The internet service provider industry in Nepal seems to surge in coming years due to following reasons:
- Increase in rapid use of internet by individuals
- The development of broadband cellular network technology from 2G to 3G to present 4G services in Nepal
- Rapid increase in internet use by local, state, governmental bodies and other national and international non-governmental organizations
- Rapid increase in number of IT software companies in Nepal, which demands high speed internet services from the internet service providers
- As per the policy of Nepal Rastra Bank, the central bank of Nepal, every agriculture and commercial banks now needs to open branches in rural areas of Nepal
- As per the policy of Nepal Government, the earlier cabled based manual TV distributions needs to digitized which also seems to be a opportunities for ISP’s
Government of Nepal seeks to implement ICT uses in the various sectors of Nepal. With the National Information and Communication Technology policy of 2015, the Government of Nepal has accorded high level of policy emphasis for the development of the ICT sector. Collaboration with different private organizations and NGO/INGO’s, the Government seeks to implement ICT in developing various sectors like human resource, education, resource and development, industry, telecommunication infrastructures, agriculture, health, tourism, environment and natural resources, cloud computing and even mitigating the effects of the climate change. Thus, implementing the ICT in these wide range seems a large market drivers for the internet service providers.
Similarly, after the formation of different provinces along with the formation of urban and rural municipalities in Nepal, it is compulsory for every bank to have branches in all states and municipalities within certain period as per the policy of Nepal Rastra Bank. All the banks are on the process of market extension. The newly established branch should meet all the banking technical and operational requirements. For this extension process, the internet service providers seems to play an important roles.
The internet price is decreasing in almost all countries over the world. Over the last 5 years period, the internet price in Nepal seems to be increasing rather than decreasing. The average yearly internet plan is above $14 for the bandwidth speed above 5 Mbps.
A recent increase in telecom service charge (TSC) of 13% in May 2018 made all internet users to pay even higher amount for the internet and telecommunications charges. The internet price in all of the ISP was increased accordingly.
Nepal, still is a developing country and most of the people can’t afford such higher amount in the internet services. Thus, the main restraint of the internet services uses by the customer seems to be the cost associated with internet price.
Poor quality infrastructure is inhibiting access to communication services. Besides high costs, poor infrastructure and nascent fibre network are a key challenge to higher adoption and access to Internet in the country.
Sharp fragmentation of the markets
Understanding the markets for expansion is a challenging job for an ISP. Since there is vast difference in development status in cities like Kathmandu, Biratnagar, Pokhara, Butwal and rural places like Humla, Karnali, understanding the consumer behavior and internet needs of the entrepreneurs may be greatly confusing. The priority for the high speed internet services may be greater in city areas but less in the rural places due to less number of internet based activities.
Uncertainty of the leased Line Service provider's end
Each ISP present in Nepal has purchased the IP bandwidth from various IP transit locations in Asia. Thus, disturbance or failure in such transit locations may create problems in the Nepalese ISP.
ISP is a technologically advance industry. The employees working in the ISP needs to have technical knowledge about the ongoing technologies. Thus, in developing countries like Nepal there may be unavailability of such technical employees to adequate level. Apart from this, the turnover of the working employee is also a great problem in IT industry of Nepal.
Speed and reliability of connection are top customer concerns. While the ISPs are limited by their scale of investments in infrastructure and keeping the SLAs as high as possible, they often feel immense stress in balancing between delighting the customer and managing the business effectively
Most of the ISP have implemented fiber based connection since 2016 in order to meet the customer requirements for higher bandwidth, reliable ,quality service and secure network based on New Generation Technology. They are upgrading the earlier copper wired based connection to fiber based connection at the rapid speed. Due to this fiber connection the customers get high speed internet services ranging from 1 Mbps to 100 Mbps speed.
Similarly, in the sector of the wireless internet the Nepal telecom, state owned telecommunication service provider, is implementing the new 4G WiMAX technology with greater flexibility and service. However, the main disadvantage of this technology is that the WiMAX device should be tentatively within 2 km radius of the base station. Thus, development in both fiber based connections and wireless connections is seen. Similarly, the ISP are too providing the net based television services like IPTV, NET-TV and WOW Time.
The internet service providers also offers web based and mobile based application systems for their customers to manage the plans they use. The basic functionalities of these applications are listed below:
- The applications have the features of locking out sites enabling manual allowing or disallowing of specific sites in the home or office network.
- The applications provide settings for automatic bandwidth management. For eg. The subscribed internet speed is 5 Mbps with limited data package of 500 GB. The customer can limit the bandwidth to 2 Mbps so that the data package will be adequate for the user.
- Unlike in the past where user had to visit the offices for the payment to renew the internet services the customer can now use mobile based payments systems
The pricing of the internet seems to be almost same in the past 10 years. The difference seen is in the speed of the internet.
In the past, the NTC provided the speed of the about 64 kbps. This was the dial-up service which was basically used for the browsing purpose only. Then after NTC upgraded the speeds to 128kbps and later 256 kbps at $9.5. Now, the NTC provides the speed of the 1 Mbps to 5Mbps depending upon the type of connections copper wired or fiber at about $7. The privately owned companies now overtake NTC by miles in their internet speed from 10 Mbps to 100 Mbps depending upon the requirement of the users. The pricing of these variable speed internet can be shown in the figure below:
Other Key Market Trends
Brand positioning and promotion trends
In recent years, ISPs have positioned themselves as not just an internet service providing company but as a brand that provides various services like data connectivity, network integration and consulting, web hosting and development, IPTV services. For e.g. NTC has positioned itself as pride of Nepal, WorldLink has positioned itself as a company that not only sees the developed cities of the country but also the rural and semi-urban areas and accordingly distributed its channels. Allocating bandwidth as per the need of the customers for individual or corporate houses is the strength of the any company. For the brand positioning and marketing, companies implemented various promotional strategies as mentioned below.
- Variable speed internet services: On the basis of need of the customers, companies has offered various option like Residential Broadband, SME Broadband and Enterprises Broadband. These options individually have their own bandwidth capacity, data services and speed. Thus, each customer has its own requirement which may differ with other and would be satisfied if all requirements are fulfilled from a same organization. With these various options, the company charges various pricing details as per the need and capability of the users. Similarly, various free packages are offered in case of advance payment.
- Internet schemes: Various free internet schemes, both on the basis of lucky draw and on the recommendations made by a customer to other new customers, the ISP’s like Worldlink and Vainet provide additional value adds to their customers
- Internet TV promotion: For promotion of various internet based television service like IPTV, NET-TV, WOW Time, various cost benefits are provided by the ISPs at the start. For e.g. WorldLink at initial phase allowed to enjoy the IPTV services for the first 3 months free just after purchase of setup box. Likewise, benefits like 3 months free package is provided in case of advance payment if made for a year.
Market Size and Forecast
Visualizing the latest 5 years trend of the internet users, the numbers of dial up users have decreased very sharply. Similarly, the wireless connections have decreased by about 28%. But the wired connection have increased by about 125%. The bar graph below shows the data about the number of the internet users in Nepal from May, 2104 to May, 2107 in a yearly basis.
Similarly, the fiber connection evolve in mid-2013 has substantial increase in the users. From May, 2017 to May, 2018 the increase seems to be about 200% in this particular type of subscribers. However, the other type of connections wireless and wired seems to fall by about 18%. The present total number of internet users in Nepal are about 426,317, out of which about 455,592 have wireless connections, 56,510 have the wired cable connections and the remaining 324,215 have the latest Fibre connections. It can be shown in pie chart as below:
Also, viewing the comparative internet penetration of Nepal with Asia and the World, the internet penetration rate seems to be growing constantly with a very minimum rate but lags the Asia and World by miles. By 2016, about 40.2% of Asia’s population and as whole a 46.4% World’s population uses internet services. But, only about 17.2% of Nepal’s total population uses the internet services. This depicts still large percentage of the population has not used internet services so the growth of the ISP is certain in coming years.
- Threat of new Entrants: Since, the ISP industry in Nepal is in growth stage there is always risks of new entrance. Investing a large amount of effort, time and money can go in vain for any ISP’s.
- Bargaining power of the users: Unlike in the start of internet services some 15 years ago, the Nepalese customers today are highly educated and have higher understanding of the internet services, can easily understand the differences among the ISP and their services, so the customers can bargain with the ISP’s and can switch their ISPs quickly.
- Threat of Substitutes: With the availability of large number of the internet service providers, customer loyalty is poor and the market is fiercely competitive
- Industry Rivalry: The ISP’s like WorldLink, NTC, Subisu, Vianet, ClassicTech are top competitors in the industry. They compete over the factors like product portfolio, pricing and plans, research and innovations, market segmentation etc.
- Product Portfolio: At present, the internet services providers in Nepal not only aim to provide the internet service as their only product but a wide range of other services and products. They have now evolved themselves as IT companies providing various services like data connectivity, network integration and consulting, web hosting and development, hardware sales and maintenance, software development and system integration. Similarly, they are also extending their services in Internet based Televisions like IPTV, NET-TV, WOW Time etc.
- Pricing Policy: ISP’s have different pricing plans for their customers. They provide wide range of plans like L, XL and XLL or Extra Value, Super value and Max value plans as per the paying capacities and needs of the customers. The individual monthly plan varies from about $7.5 to $14. Similarly, various plans are available for corporate too
- Customer Satisfaction: ISPs provide services with continuous collaboration with customers understanding their real problems and finding immediate solutions to these problems developing the company’s high value to the customers. Giving immediate queries to the customer’s complaints and problems and informing customers about the pricing plans and schemes helps in maintaining high customer satisfaction inducing stronger customer loyalty
- Market Segmentation: ISPs today are looking to take their product and services to newer areas like Biratnagar, Damak, Dharan, Birgunj, Hetauda, Pokhara, Bhairahawa, Butwal, Chitwan, Surkhet, Dhangadi and many more covering from eastern region to far-western regions. Within Kathmandu, they have basically targeted semi-developed cities places like Godwari, Chapagaun, Bhaisipati, Dakshinkali, Ramkot
- Factor Inputs: This dimension includes various input factors of the organization like the reliable technology used, capital and labor inputs and efforts on research and development. ISPs are setting up and introducing latest technologies and hiring well-qualified employees.
Key Market Players
WorldLink Communications Pvt Ltd
WorldLink is one of the largest privately-owned internet service providing companies in Nepal. Established in September 1995 with the aim of providing internet and IT services, it had firstly provided the email service to Nepali users who at that time where using the Dial up services provided by Nepal Telecom. Later in March 1997, the company started provided full internet services over leased-line to the internet backbone in the US through Teleglobe International. At present, WorldLink has its own leased line fibre backbone and buys IP bandwidth from various IP transit locations of the world at Mumbai, Chennai, Singapore and London interconnecting with various service providers like TATA, Airtel, Singtel and Cogent. It is now operating as one of the largest internet service providing company in the country whose connections are distributed to about 63 districts providing services like high speed Internet up to 100Mbps along with HD IPTV services. As per the data from the Nepal Telecom Authority, WorldLink has about the 6,517 wireless, 1,307 cables and 196,736 fibre connections which is about 48% of the total internet subscribers in Nepal.
Nepal Telecom Company Ltd
NTC is state owned telecommunication service provider in Nepal with 91.49% owned by the government. Thus, it always has the advantages of support from the government. Further, NTC includes very wide range of services like Landline phone, Internet services in both unlimited and limited forms, post and prepaid GSM services and CDMA technology. It furthers involves in various project like WiMAX and Wi-Fi Hotspot and many more so NTC seems the top competitor of Nepal
Vianet Communications Pvt. Ltd
Like WorldLink, Vianet too is a privately-owned internet service providing company. Established in 1999, it has been providing reliable and affordable Broadband internet services to the internet users of Nepal. Similar, introducing FTTH technology in 2011, the company have been able to connect more subscribers and one of the key market players of the ISP industry. Vainet Communications Pvt. Ltd. has 42,835 FTTH connections which is about 10% of the total internet subscribers.
Subishu Cablenet Pvt Ltd
Established in 2001, it is one of the pioneer ISP in the country with ISO 9001:2008 certified. At present, Subisu has about 66,500 customers which is about 15% of the total internet users in Nepal. Subishu primarily provides cable internet and television services through HFC network.
The company uses the optical fibre cable to transmit TV channels, the internet, and fibre connect solutions. The HFC network established by Subisu uses high end coaxial cable laid with multi-label protocol switching and a fully redundant metropolitan access network.
The pie chart shows the percentage of the internet subscribers of different internet service providers:
The internet penetration rate has increased from 0.8% to 17.2% of the total population. Similarly, considering the 5 years’ timeline from April 2013 to May 2018, the total number of internet subscribers in Nepal has increased from 85,817 to 426,317 which is about 400% increase.
The main reason behind such radical changes in number of internet subscribers is the rapid technological growth in Nepal which has led to higher availability of internet service with high speed unlike in past.
Even if there is rapid increase in the internet subscribers within the country, Nepal still lags by a mile in comparison to Asia’s and World’s internet penetration rates. Thus, the increase in the paradigm of the internet users are shifting from developed country to developing countries like Nepal.
Thus, with the large development activities ongoing in the different fields country like Information Technology, educational institutions, banking and finances, private institution, individual level and progressive policies supporting Information Technology from Nepal Government and Nepal Rastra Bank, depicts the higher possibility of the internet use is seen in the coming years. Similarly, the internet penetration trend also leads to the higher use of internet services in future because rate still is low. Thus, the growth of the Internet service providers for few is certain.
- Ministry of Information and Communication, Government of Nepal (2015) “National Information and Technology Policy”
- https://www.ey.com/Publication/vwLUAssets/EY_-_Top_10_risks_in_telecommunications_2014/%24FILE/EYtop-10-risks-in-telecommunications-2014.pdf [Accessed: July 22, 2018]