Ministry of Information & Communications (MOIC) : Volume I: Final Report

Organisation Development Centre (ODC)
Developing Healthy Organisation Through People
Antelope Consulting
Professional Computer System (P) Ltd (PCS)

Software Development & Computer Consultancy
Teleplanning A. Wirzenius Ltd.
For the
Ministry of Information &

Communications (MOIC)
Volume I: Final Report
For
Study on Increasing ICT Access in Rural and

Peri-urban Areas of Nepal (PS-4)
January 19, 2006

Final Report on Assignment - Study on Increasing ICT Access in Rural and Peri-urban Areas of Nepal (PS-4) i
TABLE OF CONTENTS
VOLUME I - FINAL REPORT
EXECUTIVE SUMMARY .....................................................................................................................................1

1 INTRODUCTION.........................................................................................................................................4
2 OBJECTIVES OF THE STUDY AND STRUCTURE OF THE ASSIGNMENT ..................................5
2.1 OBJECTIVES...........................................................................................................................................5
2.2 ACHIEVEMENT OF OBJECTIVES ..............................................................................................................5
2.3 OVERALL STRUCTURE OF THE ASSIGNMENT ..........................................................................................7
2.3.1 Phase I .......................................................................................................................................7
2.3.2 Phase II......................................................................................................................................8
2.3.3 Training (Consensus building and transfer of skills).................................................................8
2.3.4 Phase III ....................................................................................................................................8
3 PHASE I BACKGROUND WORK FOR DEVELOPING STRATEGY..............................................9
3.1 SUMMARY OF FINDINGS FROM SECTOR OVERVIEW ...............................................................................9
3.2 SUMMARY OF FINDINGS FROM REVIEW OF INTERNATIONAL EXPERIENCE ...........................................12
3.3 HIGH-LEVEL FINDINGS OF OTHER STUDIES ..........................................................................................13
3.4 LESSONS FROM USING COMPETITION FOR SUBSIDIES IN RURAL TELECOM ............................................13
3.4.1 Key factors in a successful approach.......................................................................................14
3.4.2 Experience of other countries ..................................................................................................14
3.5 KEY FINDINGS FROM WORKSHOPS .......................................................................................................16
4 PHASE I A STRATEGY FOR INCREASING ICT ACCESS IN RURAL AND PERI-URBAN
AREAS OF NEPAL ....................................................................................................................................18
4.1 PRINCIPLES..........................................................................................................................................18
4.2 BARRIERS TO ICT TAKE-UP .................................................................................................................19
4.3 PILLARS OF THE STRATEGY .................................................................................................................19
4.3.1 Strategic actions required........................................................................................................19
4.3.2 Some alternative community development paths .....................................................................20
4.4 UNIVERSAL ACCESS OBJECTIVES FOR TELEPHONE SERVICE .................................................................22
4.4.1 Universal access ......................................................................................................................22
4.4.2 National objectives for telephone service ................................................................................22
4.4.3 Strategy for achieving rural telephone objectives ...................................................................22
4.5 OBJECTIVES FOR PUBLIC INTERNET ACCESS POINTS ............................................................................23
4.5.1 Objectives for Internet access..................................................................................................23
4.5.2 Strategy for achieving public Internet access objectives .........................................................24
4.6 INSTITUTIONAL ARRANGEMENTS ........................................................................................................25
5 PHASE II PILOT PROJECT DESIGN .................................................................................................26
5.1 INTRODUCTION TO PHASE II ACTIVITIES..............................................................................................26
5.2 REGION-WISE OBJECTIVE SERVICE LEVELS FOR TELEPHONE AND INTERNET .......................................26
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5.2.1 Categorisation of districts in regions ......................................................................................26

5.2.2 Region-wise targets for PCOs .................................................................................................27
5.2.3 Region-wise targets for public Internet access points (telecentres and cybercafs)................28
5.3 ICT PROJECTS, PILOT PROJECTS AND IMPLEMENTATION MODALITIES ..................................................28
5.3.1 Cybercafs in DHQs ................................................................................................................29
5.3.2 Public Internet access points (telecentres) ..............................................................................29
5.3.3 Computers and Internet for Schools Project............................................................................30
5.3.4 Community radios....................................................................................................................32
5.3.5 Regional Internet exchanges facilities under ISPAN (nPIX) ...................................................32
5.4 BASIC CONSIDERATIONS FOR PILOT PROJECT DESIGN ..........................................................................32
5.4.1 Purpose of the pilot project .....................................................................................................32
5.4.2 Clustering of project components district-wise .......................................................................33
5.4.3 Selection of districts for pilot project.......................................................................................33
5.5 COST ESTIMATES FOR THE FULL ICT PROGRAMME (20052010) ........................................................34
5.5.1 Cost estimates of PCOs under subsidy (RTDF).......................................................................34
5.5.2 Cost estimate of cybercafs in DHQs and telecentres in RMC................................................34
5.5.3 Cost estimates of other projects...............................................................................................35
5.5.4 Summary of subsidy estimate for the full ICT programme (20052010) .................................36
5.5.5 Summary of the pilot project cost ............................................................................................37
5.5.6 Time Schedule of pilot project activities ..................................................................................38
6 PHASE II DEMAND STUDY .................................................................................................................40
6.1 TERMS OF REFERENCE, METHODOLOGY AND SAMPLE SURVEY FOR DEMAND STUDY .........................40
6.1.1 Terms of Reference ..................................................................................................................40
6.1.2 Methodology ............................................................................................................................40
6.2 FIELD WORK AND ANALYSIS CARRIED OUT ..........................................................................................41
6.2.1 Areas selected for Demand Study ............................................................................................41
6.2.2 Fieldwork.................................................................................................................................42
6.3 CONCLUSIONS OF DISCUSSION GROUPS AND ANALYSIS OF SURVEY DATA ...........................................42
6.4 DEMAND PROJECTIONS ........................................................................................................................43
6.4.1 Telephone demand projection of locations surveyed ...............................................................43
6.4.2 Demand for other services mobile telephones, computers and Internet ...............................46
6.5 REQUIRED SERVICE LEVELS AND TRANSMISSION CAPACITIES TO NATIONAL BACKBONES ...................47
6.5.1 Telecom network structure.......................................................................................................47
6.5.2 Transmission capacities of the municipal centre under study .................................................48
6.6 DEMAND MODELLING ..........................................................................................................................50
6.6.1 Introduction .............................................................................................................................50
6.6.2 Demand estimate summary......................................................................................................50
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7 PHASE II DESIGN OF BIDDING PROCESS AND RTDF MANUAL..............................................52

7.1 INTRODUCTION....................................................................................................................................52
7.2 INSTITUTIONAL REQUIREMENT FOR RTDF AND IFDF.........................................................................52
7.3 RURAL TELECOMMUNICATION DEVELOPMENT FUND AND THE FUND MANUAL ..................................53
7.3.1 Present status of RTDF in NTA ...............................................................................................53
7.3.2 Purpose of the manual .............................................................................................................53
7.3.3 Organisation structure of RTDF..............................................................................................54
7.3.4 RTDF Management Committee (RTDFMC)............................................................................54
7.3.5 Description of RTDF organisation ..........................................................................................55
7.3.6 Administration of funds and budgeting and plans ...................................................................55
7.3.7 Support principles....................................................................................................................55
7.3.8 Rural ICT Facility Development Fund (IFDF)........................................................................56
7.3.9 Coordination Committee..........................................................................................................57
7.4 DESCRIPTION OF BIDDING DOCUMENTS FOR THE PILOT PROJECT .........................................................58
7.4.1 MoUs .......................................................................................................................................58
7.4.2 Bidding document for procurement of telecentre equipment ...................................................61
7.4.3 Bidding documents for the procurement of the training services ............................................61
7.4.4 Selection of National NGO to manage Computers and Internet for Schools Project ..............62
7.4.5 Training (consensus building and transfer of skills)................................................................63
8 PHASE III SUPPORT TO HMG IN CONDUCTING THE PILOT PROJECT ...............................64
9 FINAL WORKSHOP .................................................................................................................................65
9.1 THE OBJECTIVE OF THE WORKSHOP ....................................................................................................65
9.2 CONCLUSIONS AND RECOMMENDATIONS ............................................................................................65
10 RECOMMENDATIONS ............................................................................................................................66
10.1 POLICY AND REGULATORY ITEMS .......................................................................................................66
10.2 RURAL TELECOM INFRASTRUCTURE FOR TELEPHONES ........................................................................66
10.3 INTERNET ACCESS ...............................................................................................................................67
10.4 COMMUNITY RADIO STATIONS ............................................................................................................67
10.5 NEW GOVERNING BODY FOR ICT IMPLEMENTATION ...........................................................................67
10.6 CENTRAL LEVEL ACTIONS FOR DEVELOPMENT OF ICTS ......................................................................67
LIST OF ANNEXES
Annex-1 Terms of Reference ..................................................................................................A-1

Annex-2 Project Personnel ......................................................................................................A-9
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VOLUME II 1st LOT OF STUDY REPORTS ANNEXED TO FINAL REPORT

1. Review of International Experience December 12, 2004
2. Sector Overview Report December 23, 2004
3. Strategy Report March 16, 2005
VOLUME III 2nd LOT OF STUDY REPORTS ANNEXED TO FINAL REPORT

4. Report on Design of Pilot Project June 7, 2005
5. Design of Bidding Process November 7, 2005
6. Demand Study Report Volume I: Field Survey November 10, 2005
7. Demand Study Report Volume II: Demand Modelling November 10, 2005
LIST OF OTHER AVAILABLE PROJECT REPORTS

8. Proceedings on Workshop on Strategies for Increasing ICT Access in Rural and Peri-
Urban Areas of Nepal December 31, 2004
9. Proceedings on Final Workshop on Strategies for Increasing ICT Access in Rural and
Peri-Urban Areas of Nepal Jan 5, 2006
LIST OF TABLES
Table 1: Telecom status and demographic features of subdivisions of Nepal .................... 10

Table 2: Opinion of adequacy of government telephone facilities ..................................... 11
Table 3: Category (Region) of Districts in Accordance with Population Density Range.. 26
Table 4: Network coverage by 2010 by NT and under SUBSIDY (RTDF),
& estimate of PCOs required under subsidy ......................................................... 27
Table 5: Growth of Public Internet Access Points in DHQs and RMCs............................. 28
Table 6: Secondary and lower secondary schools (2004) ................................................... 30
Table 7: Districts where Cybercafes and Telecentres are proposed.................................... 34
Table 8: Total Cost Estimates of cybercafes at DHQs and Telecentres at RMCs .............. 35
Table 9: Cost for Computers and Internet for Schools Project ........................................... 36
Table 10: Subsidy Requirements in the next 5 Years for the ICT Programme..................... 36
Table 11: Summary of pilot Project Costs ............................................................................ 37
Table 12: Time Schedule of the Projects............................................................................... 38
Table 13: Activities to fulfil Requirements of TOR ............................................................. 41
Table 14: Opinions during the discussion in groups about telephone demand ..................... 44
Table 15: Telephone Demand As expressed by the Respondents of
the Discussion Groups .......................................................................................... 44
Table 16: Demand of telephones based on discussion groups and Nepal Telecom data ..... 45
Table 17: Mobile phone and computer demand expressed by respondents .......................... 46
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Table 18: Increase in email and Internet Customers of NT .................................................. 47

Table 19: Nepal Telecoms Transmission links from municipalities and
RMCs to their Regional Centres ........................................................................... 49
Table 20: Current and potential household demand for fixed phone service........................ 51
Table 21: Composition of RTDFMC .................................................................................... 54
Table 22: Composition of the IFDF Board ........................................................................... 56
LIST OF FIGURES
Figure 1 Current NT plans for Phase 1 CDMA deployment.................................................. 12

Figure 2 Competition among firms for subsidies: critical success factors ............................ 14
Figure 3 Small-scale energy subsidies.................................................................................... 16
Figure 4 Actions recommended by Open Workshop ............................................................. 17
Figure 5 Illustrative community ICT development paths ...................................................... 21
Figure 6 Overall organisation of RTDF ................................................................................. 54
Figure 7 Overall organisation of IFDF ................................................................................... 56
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Final Report on Assignment - Study on Increasing ICT Access in Rural and Peri-urban Areas of Nepal (PS-4) vi
LIST OF ABBREVIATIONS
ADDCN Association of District Development Committees of Nepal

AEPC Alternative Energy Promotion Centre
APT Asia-Pacific Telecommunity
CARD Computer aided Administration of Registration Department
CATV Cable Television
CBO Community Based Organisation
CBS Central Bureau of Statistics
CDMA Code Division Multiple Access
CR Community Radio
CRM Community Radio Madan Pokhara
DANIDA Danish International Development Agency
DDC District Development Committee
DHQ District Headquarters
DLGSP Decentralised Local Governance Support Programme
DOE Department of Education
EDR Eastern Development Region
FITEL Fund for Investment in Telecommunications
FM Frequency Modulation
FMD Frequency Management Division
HLCIT High Level Commission for Information Technology
HMG His Majestys Government
ICT Information and Communication Technology
IDA International Development Association
IFDF ICT Facilities Development Fund
ISP Internet Service Provider
ISPAN Internet Service Provider Association of Nepal
IT Information Technology
ITPF IT Professional Forum
KW Kilo Watt
MARTS Multi-Access Radio Telephone System
MCT Multipurpose Community Telecentre
MHz Mega Hertz
MLD Ministry of Local Development
MOES Ministry of Education and Sports
MOEST Ministry of Environment, Science and Technology
MOIC Ministry of Information and Communications
MOST Ministry of Science and Technology
MoU Memorandum of Understanding
MSI Media Services International
NEA Nepal Electricity Authority
NFEJ National Federation of Environmental Journalists
NGO Non-governmental Organisation
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NITC National Information Technology Centre

NLSS National Living Standard Survey
NPIX Nepal Internet Exchange
NR Nepalese Rupee
NT Nepal Telecom
NTA Nepal Telecommunications Authority
ODC Organisation Development Centre
OPGW Over Power Ground Wire
PAF Poverty Alleviation Fund
PCS Professional Computer System Ltd
PCO Public Call Office
POP Point of Presence
PPME Policy, Planning, Monitoring & Evaluation Section
PSTN Public Switched Telephone Network
RFPD Request for Proposal Development
RMC Rural Market Centre
RTS Rural Telecommunication Service
RTDF Rural Telecom Development Fund
RTDFMC Rural Telecom Development Fund Management Committee
RUPP RuralUrban Partnership Programme
RWSSFDB Rural Water Supply and Sanitation Fund Development Board
SDH Synchronous Digital Hierarchy
SECEN Society of Electronics and Communication Engineers
STM STM Communications LTD
TLO Tole/Lane Organisation
TOR Terms of Reference
TSRP Telecommunication Sector Reform Project
TV Television
UNDP United Nations Development Programme
UTL United Telecom Ltd
VAT Value Added Tax
VDC Village Development Committee
VHF Very High Frequency
VSAT Very Small Aperture Terminal
WLL Wireless Local Loop
WiFi Wireless Fidelity
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Final Report on Assignment - Study on Increasing ICT Access in Rural and Peri-urban Areas of Nepal (PS-4) 1
Executive Summary
This is the final report of a 16-month project which has already produced several deliverables.
This report aims to provide an overview of the entire project; readers are referred to the earlier
deliverables for details of particular components.
For the purpose of this study, Information and Communication Technology (ICT) is broadly
interpreted to mean any electronic technology that can support information and
communications. This includes not only fixed and mobile telephony and internet, but also radio
and television broadcasting, stand-alone computers and other non-networked equipment such
as audio and video recorders.
The underlying purpose of this project is to work towards the reduction of poverty, in keeping
with the Tenth Development Plan (Poverty Reduction Strategy) of His Majestys Government
of Nepal and the Millennium Development Goals.
Most of the work has fallen into two major phases:

Formulation of a strategy for improving access to ICTs in rural Nepal, including
institutional arrangements.
Elaboration of a pilot project together with procedures for setting it up, awarding
funding and carrying out a demand study.
The strategy is based on the following cornerstones, which were established through
widespread discussion:
Planning for ICTs must be integrated into overall planning for development.
The basic approach is to be demand-driven and community-based in providing ICT
access, starting with a major drive towards improving peoples awareness of the
potential of ICTs.
A variety of different community development paths using ICTs is illustrated, in the
hope of fitting the variety of different conditions in rural Nepal.
The focus for action is at the local level, using small entrepreneurs and NGOs in
partnership.
We believe that providing computers in secondary schools is a cost-effective way of
stimulating demand for the Internet (along with achieving other useful purposes), and
we propose a realistic, if stretching, programme to do this.
A range of central actions is vital to support community-based efforts and to implement
the fully liberalised environment needed for enterprise to flourish. Some of these
pertain to the Ministry of Information and Communications/Nepal Telecommunications
Authority (MOIC/NTA), but all government departments will need to play their part,
including supporting applications and content.
The proposed approach to extending network infrastructure takes account of current conditions
in Nepal as follows:
Since Nepal Telecom (NT) now has firm plans for a wide roll-out of phone lines within
the next two years, and there are no immediate prospects for new major competitors,
we propose that public policy should focus on filling the gaps in NTs plans.
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We propose ambitious goals for widespread availability of telephone service by 2010

(in terms of lines on demand almost everywhere, and public call offices (PCO) in all
settlements over a certain size), with the aim of fulfilling the telecom policy objective
of phones within shouting distance for the highest possible percentage of the
population. The major likely obstacle to achieving these goals is the security situation.
We propose markedly more modest goals for universal access to the Internet by 2010,
in terms of public access points in a number of rural market centres per district, with
the aim of providing Internet within walking distance for a large percentage of the
population. In common with other ICT activities, this programme will be more cost-
effective if coordinated with the provision of electricity supply, and we recommend that
this be done wherever possible.
We believe that most demand is capable of being met on a commercial basis, given full
implementation of the previously agreed liberalisation policy. However, subsidies will be
needed to reach very poor and remote communities, and will be valuable in kick-starting ICT
developments.
Our costing points to a subsidy programme of some $14m over 5 years, of which up to $10m
could be spent on extending telephone infrastructure to remote settlements and providing
public call offices where these do not arise within a year of coverage. Around $1m would be
spent on public Internet access points in rural market centres, and around $3m on a variety of
community-based access projects and content and applications development. The most
ambitious community-based project is providing computers to secondary schools.
Current legislation gives NTA the responsibility of managing the Rural Telecom Development
Fund (RTDF). Successful implementation of community-based ICT projects requires a new
approach. We therefore propose institutional arrangements for parallel, accountable and
coordinated management of two separate funds, RTDF and a new ICT Facilities Development
Fund (IFDF). We envisage that as these bodies demonstrate their competence, they will be well
placed to attract additional external funding. We have drafted manuals for the operation of both
funds, including guidance on tendering procedures for different types and sizes of project.
There is potential for rural ICT access to contribute significantly to almost all areas of
development. Three areas where ICT access can be particularly valuable are education, health
and agricultural information. Programmes in all three areas will need to be set up over the next
few years, with participation from both IFDF and the relevant ministries.
In devising the network infrastructure strategy we have tried to meet the following objectives:
Ensuring that NT fulfils its roll-out plans
Fostering competition to NT in rural areas
Ensuring viability of small competitors
Getting value for money from subsidies.
Achieving any one of these is a challenge. Achieving elements of all four will be a continuing
balancing act, requiring periodic review and adaptation to changing circumstances. In
particular, though it is agreed that all comers should be allowed to operate in rural markets, it is
not yet clear how far public policy should seek to fund networks built beyond NTs roll-out
plans.
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Our demand studies included new fieldwork in several locations and analysis of existing
household survey information. Both point consistently to immediate demand for telephony far
above current levels of supply at least 30% of households and close to 100% of businesses.
Demand for the Internet, however, remains very low outside towns. This finding supports our
strategy of aiming to build demand for the Internet in step with providing facilities to meet the
demand.
Our preferred approach for pilot projects would have been to cluster them within a few
districts, for mutual support and to start to build centres of expertise. Practical constraints
prevented this approach being adopted, and instead we have planned the following pilot
activities:
Cybercafs in the district headquarter towns in three identified districts
Telecentres in smaller rural market centres in these three districts plus a further five
identified districts, making eight in all
Provision of computers in 40 secondary schools in each of these eight districts, to be
followed by connecting them to the Internet
Support for regional Internet switches, initially in four selected major towns outside the
Kathmandu Valley.
It is planned to undertake all these pilot activities in close collaboration with existing
organisations that have appropriate involvement and expertise. Draft Memoranda of
Understanding (MoU) between NTA and such organisations have been drawn up to clarify
roles.
A further highly recommended activity, which cannot be pursued in current circumstances, is

supporting new community radio stations.
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1 Introduction
This report is the final report, a deliverable for the study entitled Increasing ICT Access in
Rural and Peri-Urban Areas of Nepal. The study is part of the Telecommunication Sector
Reform Project (TSRP) being implemented, with the International Development Association
(IDA) credit, by the Ministry of Information and Communications (MOIC). This report is
structured in three volumes:
Volume I - Final Report

Volume II- First lot reports annexed to the final report
Volume III- Remaining lot of study reports annexed.
The main counterpart of the project has been Mr. Ramesh Kumar Adhikari, Under Secretary,
Project Co-ordinator, MOIC. ICT Working Group consisting of high officials of MOIC and
NTA was created to facilitate the study (Annex-2).The Terms of Reference are included in the
Annex -1.
The Consultants wish to express their sincere thanks for the strong support that they have
received from the counter parts. The Consultants express their sincere appreciation to the Chair
and members of the ICT Working group for their valuable suggestions and guidance in the
progress and finalisation of the entire study. The level of co-operation, understanding and
support has been exceptionally strong, making it possible to advance quickly, and discuss
practical proposals at an early stage.
The Consultants also wish to express their appreciation of the support and co-operation that
they have received from World Bank staff, working on the project in close co-operation with
MOIC and NTA officials.
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2 Objectives of the Study and Structure of the

Assignment
The Terms of Reference (ToR) contain a number of objectives and phased structured tasks,
with a detailed list of activities to be carried out within each task. After the end of each task or
part thereof, one deliverable in the form of a report was produced. The details of deliverables
are given in Section 3. To satisfy each particular objective, tasks performed in one or several
deliverables come into play. Therefore, one or more deliverables need to be examined to
determine how each objective has been met by the study. The detailed ToR for the study is
included as Annex-1 in this report.
2.1 Objectives
This study had the following objectives:

To develop an understanding of the characteristics of the rural/peri-urban and low
income ICT market to enable determination of appropriate methods of meeting this
demand, including the appropriate institutional arrangements.
To determine the cost of providing ICT access to rural/peri-urban and low income users
(groups) and the proportion of the cost that should be borne by these users compared
with the proportion that should be subsidised by the Rural Telecom Development Fund
(RTDF).
To determine the cost of expanding Internet points of presence in all districts in Nepal,
and also to encourage the private ISPs to expand their services in the rural areas.
To recommend the institutional and regulatory requirements for operation of the RTDF.
To set out the mechanisms for the private sector to participate in the delivery of ICT
services for rural and low income users and the regulatory requirements to monitor such
service providers, and to recommend a detailed strategy to improve access to ICT in
rural/peri-urban and other under-served areas.
To develop appropriate business models for the sustainable delivery of ICT access to
rural/ peri-urban and low income users through publicprivate partnerships.
To design and support His Majestys Government (HMG) in conducting a pilot project
for public access to ICT.
2.2 Achievement of objectives
The study was based on a more detailed ToR (Annex-1), designed to meet the above
objectives. Let us examine in summary how these objectives have been met in the study:
Characteristics of the low income ICT market and methods of meeting demand: The
Sector Overview has created the background to understanding the characteristics of the
market, which are as follows:
o Very low penetration of telephones in rural areas, but demand exists throughout the
country.
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o Internet has just started appearing in District Headquarters (DHQ) but the demand is
very low, even in these comparatively developed centres. Illiteracy, poverty and lack of
perceived useful applications apart from the lack of access facilities are the main causes
of low demand.
o Demand for broadcasting radio, TV and FM radio in particular is high but again
these have coverage problems.
Cost and manner of providing ICT access to rural and low income users: This has
been primarily developed in the Pilot Project Design.
o Telephone service can be largely taken care of by commercial means except for a small
percentage of population. The requirements for subsidies to extend coverage of
telephones up to 98% of the population have been worked out.
o Rural areas need promotional interventions to establish telecentres for Internet access,
and FM radios and almost full assistance for school computers and Internet. The
coverage objectives for each of these ICTs have been worked out and the subsidies
required have been presented.
Cost of encouraging the private ISPs to expand their points of presence in all districts
in Nepal: The Sector Overview sheds light on this.
o Apart from the main regional centres, where private ISPs already exist, the demand for
Internet services is low. Private ISPs are not required to be physically present in the
district centres as long as they can be accessed at local call rate from the districts within
a region.
o Therefore, NTA was strongly advised to take regulatory steps to oblige incumbent ISPs
to provide local call rate access for any ISP in the same manner they do for their own
Internet customers
o The cost of providing Internet switching facilities in the bigger regional centres has
been worked out as assistance to ISPs.
Recommend the institutional and regulatory requirements for the operation of the
RTDF: This has been worked out in detail in the Bidding Process Design.
o The need for a proper autonomous institution for implementing ICT projects was very
strongly felt in order to manage ICT activities other than telecom infrastructures. The
draft manual for regulatory structure (organisation and functions) has been developed.
The institution is called ICT Facility Development Fund (IFDF).
o An RTDF management committee under NTA was recommended for managing
telecommunications infrastructure with RTDF. Its organisation and functions have been
worked out and an RTDF manual has been developed.
Set out the mechanism to enable the private sector to participate in the delivery of
ICT services for rural and low income users and develop appropriate business models
for the sustainable delivery of ICT access to rural/peri-urban and low income users
through publicprivate partnerships: These related objectives have been dealt with in
Strategy Report, Pilot Project Design and in RTDF and draft IFDF manuals.
o Telecom infrastructure requiring application of RTDF will mainly be utilised by
competitive bidding for support (subsidy) or maximum coverage for fixed support.
Some smaller initiatives may also be dealt with by criteria not requiring competitive
bidding.
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o Telecentres are to be installed for promotional purposes and should be established with
initial one time support under community ownership. The sustainability of these will
then be the responsibility of communities, with some supervision from the government
agencies.
o These projects will be again on a demand-driven basis.
o Computers and Internet for Schools Project will also be one time support to the schools.
o FM radio is another item identified as a very useful investment for rural development
and empowerment also requiring one time support for equipment under community
ownership.
Design and support HMG in conducting a pilot project for public access to ICTs: This
design part has been dealt with in Design of Pilot Project and Designing Bidding Process
and the implementation support has been carried out during pilot project implementation.
o Telecom infrastructure and PCO implementation has been deferred for a year or two
while NT is implementing its large scale rural coverage through CDMA and district
satellite projects. This is the time when NTA is advised to engage itself in determining
the gap between what NT is going to implement and the national objective
recommended in the strategy document.
o For all ICT project components, project partners have been identified for pilot project
implementation, which requires special skills in implementation of community owned
demand driven projects. Suggested are experienced partners like RuralUrban
Partnership Programme (RUPP) for telecentres in rural market centres and cybercafs
in the DHQs, an experienced national NGO for the Computers and Internet for Schools
Project, and Internet Service Provider Association of Nepal (ISPAN), the owner of
Nepal Internet Exchange (NPIX), with experience in establishing and running peering
arrangements, for the regional Internet switching project.
o The MoUs with partners and required bidding documents for equipment and services
have been designed.
2.3 Overall structure of the assignment
In brief, to meet the above objectives, the overall assignment was divided into three (3) phases,
each of which contained a number of activities to be performed. The details of tasks to be
performed are given in Annex-1.
2.3.1 Phase I
This phase consisted of the following activities:

To analyse the existing level of provision of these services and determine existing
potential demand for them and constraints to their development (technical, economic
and regulatory).
To propose viable alternatives to meet this demand, with a detailed analysis of the costs
involved as well as the regulatory implications, and also suggest the role of the RTDF.
Based on the above analysis, to develop practical strategic options and operational
schemes for the provision of necessary infrastructure and services, such as Internet
Points of Presence, telecentres, and Internet access for schools.
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2.3.2 Phase II

To conduct a demand study.
To develop a detailed pilot project to be funded by the RTDF (managed by NTA) to
demonstrate the viability of the proposed strategy.
To prepare the bidding documents for the pilot project (for Internet POPs and
telecentres), which can be considered as an experimental bidding round from the
RTDF.
2.3.3 Training (Consensus building and transfer of skills)
This task consisted of the following:

To conduct an in-country workshop to present the findings and outputs of the
assignment, as an essential step in securing the necessary consensus to ease approval of
the policies developed with all stakeholders in the sector.
To provide, throughout the assignment, hands-on training to MOIC staff in ICT in an
effort to transfer skills to their counterparts.
2.3.4 Phase III

To support HMG in conducting the competitive bidding process under the pilot project
designed in phase II.
To support HMG in negotiations with the winning bidders.
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3 Phase I Background Work for Developing Strategy
In this phase, two background reports on Sector Overview and Review of International
Experience were produced for developing strategies for increasing ICT access in the rural and
peri-urban areas. Two workshops were conducted: the first one consisted of a small group of
experts to discuss various options for strategies; the second was organised to discuss and
develop consensus for final strategies with stakeholders, and had a larger number of
participants.
3.1 Summary of findings from Sector Overview
Ruggedness of the major part of the country; size of rural population (85%); huge
diversity in distribution and densities of population, ethnicity and language.
Rural infrastructure 15 of the 75 DHQ were yet to be accessed by road; electricity has
reached only 40% of households on average.
Rural economy 80% of the people are dependent on agriculture; much skewed
income distribution (the total consumption of the highest decile is six times as much as
that of the lowest decile, and eleven times as much for non-food items); about 32% of
the population live below the poverty line.
Low literacy rate 53% of the adult population; the rural average being still lower.
Use of information systems and email/Internet by the government is at a fairly low
level. Use of websites for some public services is developing slowly; delivery of some
public services through the web is being promoted by HLCIT/NITC/MOEST.
Government does not yet use email in its transactions.
The broadcasting sector is reasonably liberalised and a number of FM broadcasting
licenses, both commercial and community owned, are in operation.
Community FM is the proven media for rural development.
Nepal has substantial experience in establishing telecentres which provide
communication and Internet services in the community. Sustainability aspects such as
lower operational expenses, opportunities to earn from other than communication and
information services, and sustained central guidance for some time are essential needs
to be considered right from the beginning of the project. Telecentres in the past were
lacking in these to some extent.
There are a number of private or NGO initiatives in Nepal for providing ICTs.
Autonomous institutions like Alternate Energy Promotion Centre, Water and Sanitation
Board and Poverty Alleviation Fund were found to be suitable examples for
implementing community owned and demand driven projects like ICTs under full or
part subsidy.
The telecom sector has been slow to liberalise and telecommunication services are
mainly limited to the capital city and the municipalities. Rural coverage is very low and
that too has further suffered quite extensively in the conflict and due to security
reasons.
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Table 1 shows the telecom status in the subdivisions of the country, highlighting its
inadequacy. Similar opinions expressed by the people in the Table 2 are also worth
noting.
TABLE 1: TELECOM STATUS AND DEMOGRAPHIC FEATURES OF SUBDIVISIONS OF NEPAL
Fixed Revenue
Population Municipal % of VDCs DHQ with DHQ with
Population lines /fixed line
Subdivision density population with phone NT internet NT mobile
1000s /1000 pop NR/month
per sq km % (Dec 03) (local rate) Service
(Dec 03) (Dec 03)
E Mountain 402 39 10% 48% 3 1454 2 of 3 0 of 3
E Hill 1643 153 8% 43% 3 1400 7 of 8 3 of 8
E Terai 3299 454 15% 61% 14 1071 5 of 5 5 of 5
C Mountain 555 88 5% 37% 2 1081 1 of 3 0 of 3

C Hill excl KV 1898 174 10% 47% 6 1048 5 of 6 4 of 6
C Terai 3933 422 10% 43% 9 1066 7 of 7 7 of 7
W Mountain 25 4 - 100% 6 2702 0 of 2 0 of 2

W Hill 2793 152 14% 53% 7 1776 10 of 11 4 of 11
W Terai 1753 333 10% 58% 13 940 3 of 3 3 of 3
MW Mountain 310 15 - 15% 1 924 0 of 5 0 of 5

MW Hill 1452 106 6% 31% 2 1537 4 of 7 1 of 7
MW Terai 1231 168 15% 81% 9 1210 3 of 3 3 of 3
FW Mountain 398 50 0 37 1 687 0 of 3 0 of 3

FW Hill 798 118 8 49 2 1505 3 of 4 1 of 4
FW Terai 995 205 19 75 10 862 2 of 2 2 of 2
Kathmandu
1645 1830 61 90 119 953 3 of 3 3 of 3
Valley (KV)
Eastern 5344 188 12 52 10 1110 14 of 16 8 of 16

Central excl KV 6386 241 10 43 7 1062 13 of 16 11 of 16
Western 4571 155 12 56 9 1319 13 of 16 7 of 16
Mid Western 2993 71 9 38 5 1258 7 of 15 4 of 15
Far Western 2191 112 12 50 6 945 5 of 9 4 of 9
Mountains 1690 33 4 38 2 1233 3 of 16 0 of 16

Hills excl KV 8584 142 10 46 4 1504 29 of 36 13 of 36
Terai 11211 330 13 55 11 1041 20 of 20 20 of 20
Nepal excl KV 21485 147 11 48 8 1150 52 of 72 33 of 72
Nepal 23130 157 15 49 16 1045 55 of 75 36 of 75
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TABLE 2: OPINION OF ADEQUACY OF GOVERNMENT TELEPHONE FACILITIES1
Good % Fair % Bad %

Development region
Eastern 19.8 58.2 22.1
Central 16.3 62.7 21.1
Western 10.7 55.9 33.4
Mid Western 8.1 43.5 48.4
Far Western 12.5 49.3 38.2
Ecological zones
Mountains 6.8 31.0 62.2
Hills 14.0 48.6 37.4
Terai 16.7 67.6 15.7
Urban 33.5 61.9 4.7
Kathmandu Valley 42.6 56.0 1.4
Other 28.7 64.9 6.4
Rural 10.3 55.9 33.8
East Mts/Hills 10.7 44.1 45.3
West Mts/Hills 3.9 38.7 57.4
East Tarai 13.4 71.4 15.3
West Tarai 12.3 64.1 23.6
Consumption quintiles
Poorest 8.8 62.5 28.7
Second 9.5 58.9 31.5
Third 9.4 56.2 34.5
Fourth 14.3 56.4 29.3
Richest 24.7 54.7 20.6
Nepal 14.9 57.1 28.0
Most of the district headquarters did not have Internet services until mid-2004 when
local rate dial-up Internet was made possible in some districts. Now altogether 55
districts in the country have such facility. The other 20 districts will join only by the
end of 2006 if NTs CDMA and district satellite services expand as planned.
NTs recently launched CDMA wireless telephone project for extensive rural coverage
is waiting for Supreme Court clearance to proceed further. Current plans (for
completion by mid-2007) include some coverage in every district. Based on
assumptions about the distribution of population and NTs roll-out plans, we estimate
that 81% of the rural population live within this planned coverage. A second stage of
CDMA deployment should further extend this coverage, to maybe 98% of the rural
population by 2010. Nepal Telecom is deploying the first phase of 1m lines (fixed and
mobile, in proportions not yet firmly decided) by July 2007 (see Figure 1).
In addition, the rural operator STM is extending access using VSAT technology in its
licensed region (Eastern Development Region (EDR)).
These CDMA base stations will be linked by a new backbone network, using fibre,
microwave and satellite technologies. By mid-2006, all district headquarter towns will
be able to access the Internet at local rates through NTs network.
1
Source: Nepal Living Standards Survey 2, CBS, December 2004
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FIGURE 1 CURRENT NT PLANS FOR PHASE 1 CDMA DEPLOYMENT
3.2 Summary of findings from Review of International Experience
Case studies shown below were chosen for their relevance to Nepal, the availability of
thorough and objective information about them, and to provide an illustrative variety of
different approaches. Naturally, each application is specific to the circumstances and culture of
the place in question. Nepal is always different. Even apparently relevant approaches could
turn out quite differently if replicated in Nepal.
The Gramin Sanchar Sewak scheme from Madhya Pradesh in India, where postmen
have been carrying mobile phones on their delivery rounds for use as mobile PCOs
(Public Call Offices) by villagers. This pilot scheme appears to be going well.
In a Rurtel scheme in Laos, a statistical study shows that provision of telephony access
has a significant positive effect on incomes.
The Jhai Foundations provision of computers to rural schools in Laos. Some
installations are already achieving financial self-sufficiency.
The DakNet Mobile Ad Hoc Connectivity installation in Uttar Pradesh, where bus-
mounted Mobile Access Points touring the area permit rapid data exchange to village
kiosks equipped with suitable computers.
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Examples of e-post implementations in India and Bangladesh for two-way

communications. However, services elsewhere appear to be rather expensive and rely
on commercial mailings to break even.
A multifunctional item of terminal equipment (for video, audio and text) currently
under development, the PCtvt with a simple user interface suitable for illiterate users.
They are worth monitoring through their trial stages.
Indias rapidly growing e-Chaupal system, a network of rural Internet kiosks which
enables farmers to deal directly with a large purchaser of agricultural produce (the
company ITC), bypassing traditional middlemen.
3.3 High-level findings of other studies
A recent proliferation of new projects in the international arena means that most are young
projects needing at least a couple of years to get set up and start to show useful results. The
high-level findings of all the studies support common sense and may seem to state the obvious.
For example:
ICTs are most successful in reducing poverty when they are embedded within effective
poverty-reducing strategies.
Successful strategies have to be sensitive to local conditions and subject to the
dynamics of community life.
This means a heavy focus on appropriate content and applications, and on building
peoples capabilities to access and use these. Physical infrastructure alone will not do.
It takes time for communities to learn to exploit the potential of new technologies.
Premature withdrawal of outside support risks wasting previous investment and effort.
The examples from India, which has much in common culturally with Nepal, suggest desirable
development strategies that encompass one or both of two general areas:
The improved delivery of government services, where services are comparable to

those in Indian examples such as Gyandoot; Bhoomi; Community Information Centres
(Sikkim); Tamil Nilam Touch Screen Project; FRIENDS Kerala; Mahiti Shakti; and
Computer-aided Administration of Registration Department (CARD), Hyderabad.
Support for the agricultural economy, seen in such examples as the Anand Milk
Union; Tarahaat; E-Chaupal; Warna Wired Villages; and India Agriland; and in
projects offering a mix of the two, such as Janmitra, Jhalawar (Rajasthan); SEWA,
Ahmedabad (Gujarat); and N-Logue Telecentres Project, Madurai (Tamilnadu).
3.4 Lessons from using competition for subsidies in rural telecom
This section aims to highlight what we can learn from the growing body of international, and
Nepalese, experience on competing for subsidies.
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3.4.1 Key factors in a successful approach
Figure 22 identifies some key factors behind the success of this approach, when considering its
applicability to any infrastructure services.
Demand factors Supply factors Enabling environment

Limited or no capital Several firms are qualified to Elements of market-oriented legal and
contributions are bid for subsidies regulatory framework are in place
required from users Business opportunities are Government has access to stable and
Subsidies can be easily aligned with operators reliable sources of subsidy finance
targeted to poorest users strategies Private investors have access to long-
Users are able and willing to Project components are cost- term financing
pay for services effectively packaged Donors and different tiers of
Service features are tailored government are able to coordinate
to user needs and financing policies
preferences National infrastructure networks are
Services have considerable already relatively developed
growth potential Institutional capacity is in place to
implement and manage a
competitive subsidy system
FIGURE 2 COMPETITION AMONG FIRMS FOR SUBSIDIES: CRITICAL SUCCESS FACTORS
We note that some of these factors will be relatively easy to fulfil for ICTs in Nepal (e.g.
services have considerable growth potential). Others are impossible within the time-frame of
this project (e.g. national infrastructure networks are already relatively developed). Most
factors lie between these extremes.
Indicators of the success of a bidding process for subsidies may include:

The number of bidders for each opportunity
The amount of subsidy awarded compared with the maximum amount available
The amount of private investment achieved per unit of public investment
The public value of the projects that have been made possible by the process.
3.4.2 Experience of other countries
Detailed relevant experience from two countries, Chile and Uganda, is available to this project,
together of course with Nepals own experience of competitive tendering for a subsidy for
providing rural telecommunications in the Eastern Development Region3. We have also
considered how Perus FITEL has been operating since 19964. Below we summarise some
points worth noting.
2
Source: Private provision of rural infrastructure services: competing for subsidies, by Bjrn Wellenius, Vivien Foster and
Christina Malmberg-Calvo, World Bank Policy Research Working Paper 3365, August 2004. Countries mentioned include:
Chile, Colombia, Peru, Guatemala, Bolivia, Nicaragua, Paraguay, Argentina; Uganda, Ghana, Benin, Cape Verde, Togo;
Nepal.
3
Documented in Output-based aid in Nepal: Expanding telecommunications service to rural areas, by Hank Intven, Edgardo
Seplveda, and Curt Howard, OBApproaches Note Number 02, December 2004 (available at http://www.gpoba.org).
4
Main sources: Telecom subsidies: Output-based contracts for rural services in Peru, by Geoffrey Cannock, World Bank
Note Number 234, June 2001 (series: Public Policy for the Private Sector); Rural Telecommunications and Universal Access in
Peru: Fund For Investment In Telecommunications (Fitel), Osiptel, 2002.
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Latin America
Chiles long and successful history of using competitive tendering for rural telecom in a
relatively prosperous country (between 1995 and 2002, access was raised from 85% to
99% of the population) has been confined to payphones. Annual bidding rounds started
with regions needing least subsidy (at $3 a head) and moved progressively outwards to
the more expensive areas to serve (at $45 a head). ICTs are recognised as a much more
complex undertaking, in part because proposals must be assessed on merit as well as on
cost5.
Perus pilot FITEL project, launched in 1997, provided public payphones to 213
villages in the North Border region. Like Chile, Peru is much more prosperous than
Nepal, and only 30% of its population is classified as rural, but these people are
scattered over a large and mountainous land area which is expensive to serve. Subsidies
amounted to $11 a head, considerably lower than initial estimates.
Uganda
Uganda is much more similar to Nepal in its level of prosperity, and incidentally also in
its size, but is significantly more advanced in liberalising its telecom sector.
Ugandas single bidding round so far (in late 2002) had 5 lots, of which two were non-
network-related ICT projects (training and content creation). The other three,
payphones, Internet Points of Presence and Internet Cafs, were seen as priorities and
received most of the available funds.
The Ugandan approach has defined six different levels of tendering procedure, ranging
from international open tender for subsidies potentially exceeding US$100,000, down
to direct disbursement for amounts below US$1,000. Direct disbursement on approval
of a sound business plan is permitted in certain circumstances for amounts of up to
US$15,000.
Nepal
Nepals one experience of competitive tendering for rural telecommunications, in the
Eastern Development Region, was of few bidders, resulting in a subsidy of US$12m.
This figure is low per head of population served compared with the examples from
Chile and Peru ($2 to $4, rather than $11 for Perus pilot and up to $45 in Chile), but it
is more than double informed estimates of what a network to serve the region needs to
cost. The episode has led to various reactions:
o It has been suggested that future exercises of this kind should clearly limit the
available subsidy at the outset, based on demand assessment; should ensure terms
of interconnection that will contribute usefully to covering the rural operators
costs; and should provide rural operators with other business opportunities.
o There is also a feeling in Nepalese circles that the conditions for tendering in this
case effectively excluded local companies from taking part (even if this was not
intended), and that in future the balance should be redressed.
o It is felt that the call charges being applied from the new PCOs are too high. Also,
the PCO franchise terms on offer may not be attractive where traffic is low.
5
The Chilean experience is summarised in Closing the Gap in Access to Rural Telecommunications, Chile 1995-
2002, by Bjrn Wellenius, World Bank Discussion Paper 430, 2002.
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Nepal also has considerable experience of managing subsidies in other sectors. The
small subsidies available in the alternative energy sector (see Figure 3), mainly
awarded on the basis of technical assessment and a sound business plan, are regarded as
particularly successful. Other examples are available from rural water and sanitation,
and poverty alleviation.
Alternative Energy Promotion Centre: Government subsidy policies
Micro-hydro: 70,000 NR/kW (3kW to 100kW), plus up to 21,000 NR per kW

transportation cost
Solar: 5,600 to 11,500 NR or 50% of costs if less, higher amounts in more remote areas
and for productive uses, reducing by 10% per year. Up to 75% for larger community
owned systems if used for productive purposes.
Biogas: 5,500 to 11,500 NR per family-size installation, depending on size of plant and
status of district.
Improved cooking stoves: no direct subsidy, but support for information and
development efforts.
FIGURE 3 SMALL-SCALE ENERGY SUBSIDIES
3.5 Key findings from workshops
The Expert Workshop and Public Workshop provided invaluable fora for the project team to
test ideas, and for building consensus. Both events largely confirmed the evolving strategy
proposals. They also brought in some new ideas, added important details, and pointed out gaps.
This section aims to summarize the new material contributed by these events. Several problems
highlighted in the Sector Overview were seen as soluble by appropriate actions by certain lead
agencies summarised below in Figure 4.
The Open Workshop put forward a sample split of (say) 60% of funds to be spent on network
infrastructure versus (say) 40% on user equipment, applications, training and other smaller-
scale activities. It also suggested that the strategy should be geared towards achieving:
a) Short term targets and goals in peri-urban areas

b) Medium term targets and goals in rural areas.
The following points also arose from the Open Workshop, in many cases based on earlier
discussion at the Expert Workshop:
Competitive bidding for least subsidy is a good approach for sizable infrastructure
projects. However, most community owned ICT facilities to be created in a demand-
driven fashion may not be suitable for this approach. Small access network facilities
may be created under some different subsidy criteria.
A separate management unit can be created within NTA acting as a secretariat with
responsibilities of daily administration and project execution under RTDF, consisting
of a board of directors, government and community representatives including
operators representatives, to develop procedures, policies etc. for ICT development,
and to monitor and evaluate performance.
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Finding Required action Responsible

1 Use of information systems, Educate officials, promote ICT use MOST/HLCIT/NITC
email, Internet in government
low
2 Radio licensing regulations Minimise discretion by extending and MOIC
discretionary clarifying licensing criteria
3 License fees too high for Remove or greatly reduce fees for MOIC/NTA
community radio and rural cable selected classes of activity
networks
4 Official levies too high for ISPs to Waive royalty and RTDF contribution for MOIC/NTA
expand in rural areas rural operators
5 Telecom policy implementation Press for rapid legislation; where MOIC/NTA
slow possible, implement changes within
existing legal framework
6 Lack of backbone infrastructure Encourage NEA to provide optic fibre MWRPPPW/NEA

along E-W and N-S power grid.
Automatic right of way and no charge Dept of Roads
beyond cost recovery for laying cables
alongside roads.
7 Trunk rates for internet access Require NT to make same facilities NTA
no local PoP or virtual PoP available to competing ISPs as for its
own Internet operation
8 Interconnection, leased circuit Require NT to lease infrastructure to NTA
rates not regulated competitors promptly, at rates limited to
cost recovery
9 No one-door policy spectrum to Unify licensing procedures FMD/MOIC/ NTA
licensees
10 WiFi licensing position unclear Free WiFi bands like elsewhere, at least FMD/MOIC
for rural and out of Kathmandu
11 Community radio problems Implement agreed reforms MOIC
FIGURE 4 ACTIONS RECOMMENDED BY OPEN WORKSHOP
It was recognised that sustainability issues of rural ICTs could be addressed to some
extent by creating the demand for services by the communities themselves. Funds
should be generated from the local bodies, including, for instance, VDCs and DDCs.
However, the role of the state in sustaining the services in the context of more difficult
and poorer communities cannot be ignored.
Providing access to physical facilities and to insure its optimal use by creating value
from the service for the community is even more important. Relevant content
development was considered as an extremely important aspect for making ICT access
worthwhile for the communities and was felt to be missing from this study
Community radio (CR) can be considered exemplary in the context of Nepal. However,
lack of clear policy on community media and lack of laws and regulations on
differentiating community radio from commercial radio are some of the barriers that are
being faced by CRs. Community television could also be an important alternative for
disseminating information and creating demand for ICT services in the local
community, as visual and verbal media are effective in the rural context.
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4 Phase I A Strategy for Increasing ICT Access in

Rural and Peri-urban Areas of Nepal
Based on the background study described in Section 3, strategies developed are presented
below.
4.1 Principles
Based on the Nepalese situation and international experience as discussed above, we put
forward the following principles as a basis for the medium-term strategy.
Diversity: Nepal has a highly varied society. Terrain, climate, type of economic
activity and level of prosperity, level of education, language, caste, ethnicity and
culture all vary tremendously from place to place, demanding a range of options to
cater for the diverse population and to preserve this diversity by permitting production
as well as consumption of content.
Natural growth: Every community has to follow a progressive development path. New
ICTs must be appropriate to each stage of development. Villages should have as long as
they need to absorb each step, with appropriate outside support and training. Gradual
change also allows for assessment of effects of new technology, and adjustment of the
programme to take account of learning so far.
Oral society: Nepal, and especially rural Nepal, remains a predominantly oral society.
Speaking, listening and remembering what is heard come naturally to most people.
Only a small minority of people are really comfortable with tools like the Internet
which were designed in entirely different social contexts. ICT provision should build
on traditional strengths, and include the provision of skilled intermediaries (Internet
scribes) to make non-oral media easily accessible to everyone.
Community spirit and voluntarism: Community spirit is still strong in Nepal. The
successes of community based development, and of community radio, rest in
significant part on this valuable heritage. There is a strong NGO sector in Nepal (both
indigenous and internationally supported) which provides an excellent base for
cooperative efforts.
Start with young people: Evidence from Nepal, as from many other countries, is that
young people take up new technology with ease, while their elders often see no use for
it. From an economic point of view too, it obviously makes sense to invest in the skills
of young people, as there will be a long period in which to reap the benefits.
Sustainability: Outside assistance is of limited duration. To be of lasting value,
projects must have the potential to be self-sustaining.
Interventions designed to increase demand for ICTs should be considered along with those
designed to directly increase supply. In the Nepalese context, these may be more effective.
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4.2 Barriers to ICT take-up
The main barriers to ICT take-up in rural Nepal may be identified as follows:
Supply side problems
Closed telecom market: Lack of telecom connectivity is a fundamental obstacle to

two-way communications. Much of the limited telephony infrastructure that does exist
is not data-grade. Currently licensed operators are too few and have inadequate
resources to meet demand more resources and new entrants are needed. Although
there is now an official open market policy, it is still difficult to get a licence to provide
network infrastructure in Nepal.
Inadequate resources to deliver services: Private sector ICT activity in Nepal is

vigorous but still small-scale. For example, there is not yet enough skilled manpower to
deliver appropriate ICTs all over rural Nepal, even if other barriers were overcome.
Demand side problems

Not enough money to pay for services: People in rural Nepal are generally very poor,
and have little cash to spare for anything. There is undoubtedly a demand for access to
make and receive phone calls (whether using fixed or mobile technology). To satisfy
this demand it is essential to make it possible for people to spend very small amounts at
a time, which points to shared access.
ICTs not seen as a priority: People who are living without drinking water or
electricity are unlikely to see ICTs as a priority. There is still a gap in understanding of
what the Internet can do, and because of a lack of locally relevant content and
applications, the reality is that the Internet is of limited direct use to villagers.
4.3 Pillars of the strategy
4.3.1 Strategic actions required
All evidence from other countries6 is that if such barriers are lowered, demand will grow,
supply will meet demand, and rural ICT take-up will increase. Any successful strategy for
increasing access to ICTs in rural Nepal must therefore include the following components:
Policy and regulatory reforms: Implement open licensing as envisaged in Telecom
Policy 2004 to allow entry of new operators. Promote provision of optical fibres over
the power grid and their use as leased circuits. Regulate the prices and conditions of
supply of leased circuits, interconnection for new telecom operators and dial-up
Internet access.
Boost the supply side: The private sector and NGOs need support in order to rise to
the new opportunities. In particular, small firms need reduced bureaucracy, easy access
to capital, and ability to hire skilled people in all areas. Publicprivate partnership
arrangements are especially to be encouraged.
6
As summarised, for example, in our Review of International Experience.
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Inject cash strategically: Lack of money to pay for services may be less of an obstacle
than it appears. Even very poor communities will pay a small percentage of their
income for telecom, and with falling costs this is often enough to pay for shared access.
But extra cash may still be needed where costs are high, to help excluded groups, or
where expensive technology is required.
Mobilise communities: Integrate the ICT agenda into community mobilisation
initiatives aimed at poverty reduction and sustainable development, especially in areas
where local self governance programmes have been launched. The most appropriate
institutional arrangements at the grass-roots level for implementation of rural ICTs are
likely to involve partnerships, including for example local CBOs, NGOs and schools.
Add value to ICTs: To make people want ICT access, its value must be increased.
This means providing applications which help to deliver services in vital areas like
health and agriculture.
Develop and share tools: There is scope for many useful new tools and techniques
specific to Nepal, for example local language content, use of solar energy to power
computer equipment, and business models for ICT based enterprises. Development of
such tools and techniques should be supported and the outcomes shared by everyone.
Coordinate and collaborate: There are many current ICT initiatives which are more
or less independent of each other. Coordination could increase effectiveness. ICTs
themselves offer excellent tools to help, e.g. websites and email groups. Many of the
proposals in this strategy can most economically be carried out through existing
channels. Networks of I/NGOs interested in particular areas such as kiosks, PCOs or
community radio could be especially effective in sharing experiences of income
generation, community management tips, etc.
4.3.2 Some alternative community development paths
Figure 5 below illustrates some possible ICT development paths that different types of
community could choose, in various forms of partnership. These could eventually become
either financially viable, or clearly justifiable in terms of development benefit.
Candidate
Development path Finance partner Remarks
locations
1 Provide computer(s) in a Education budget; 4,350 secondary Expands skill base and
secondary school for rural electrification schools, 789 future market as well
educational purposes; open programmes (to higher secondary as meeting current
for public use outside school ensure power schools demand
hours; later (when phone available)
service arrives, or through ad
hoc WiFi connectivity), link to
the Internet
2 Expand existing PCO Private sector Estimate 1,500 Only some have right
business to provide assisted village PCOs skills and could be
email service through commercially viable
Internet connection
3 Provide Internet and phone NGO/central 75 Districts, 650 Could be standard
for an NGO-led development Ministry VDCs reached by practice, where
project; extend capacity of DLGSP feasible, for
installation beyond the government/NGO
projects immediate needs so projects
the facilities can be shared
by outside users
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Candidate
Development path Finance partner Remarks
locations
4 Provide phone at all health Health budget, 3,160 sub-health Needs central
centres, available as PCO; telecom operators posts coordination from
later Internet access (for both MOH to get best value
health workers and public)
5 Support local initiatives like International Few Depends on
Mahabir Puns Internet philanthropy exceptional individuals
connections in the Nangi
area
6 Get postmen to provide a Postal department, 200 fast-track rural Good use of existing
growing range of private sector market centres postal resources but
communications services to courier services (RMCs)/Ilakas, up requires major network
villagers as local connectivity to 1,500 RMCs infrastructure
improves (e.g. post e-post expansion
use of mobile phone)
7 Build use of existing NGO/government Under 20 Exploit existing
multipurpose telecentres by investment more fully;
making usage affordable and use these as base for
actively publicising the developing
services available applications for wider
use
8 Start community radio Local enterprise, Many communities Proven Nepalese
stations, later connect office NGOs ready now 5 a model, very cost-
to Internet year could be effective way of
supported reaching many people
9 Link cable TV stations to CATV ~750 towns have Could serve urban
Internet, give social mission, entrepreneurs CATV poor and peri-urban
provide public access to both residents
TV and Internet
10 Provide computer access for Education and 15 technical See comments on
all students in further/higher vocational training schools, ~170 schools; but more
education, and Internet funds private training investment justified for
access in all colleges institutions, 5 each institution
universities with
~300 campuses
11 Rural banks to modernise Banks See Ilakas/RMCs Banks will soon need
branch communications, above to modernise to stay in
while providing PCO service business
12 Incentives existing Cybercafs 1,000 in larger Good way to reach
cybercafs to attract wider towns urban poor and peri-
clientele and set up new urban residents
branches to serve marginal
groups
13 Provide radio/TV sets for Broadcasters Thousands of Satellite broadcasts
shared community use; later, small, remote now reach everywhere
could record programmes for settlements but not everyone;
individual replay shared use requires
responsible leader and
suitable shelter
14 Link telecommunications Entrepreneurs Hundreds of Different tariffs for
upgrade to developing attractive locations tourists and locals
tourism
15 Low cost telegraph system Local government/ Areas isolated by A stop-gap measure to
using Citizens Band radio entrepreneurs conflict reduce isolation
FIGURE 5 ILLUSTRATIVE COMMUNITY ICT DEVELOPMENT PATHS
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4.4 Universal access objectives for telephone service
4.4.1 Universal access
There is well-established demand for a telephone service in Nepals rural areas. Unfortunately,
Nepal has suffered a period of stagnation (and, in conflict areas, decline) in provision of rural
telecom infrastructure. Our proposed strategy for extending network infrastructure access in
rural Nepal builds on these plans of Nepal Telecom and STM. This is for the following
reasons:
Rural areas of Nepal can mainly be served most economically by terrestrial radio
systems (as we discuss below). While satellite terminals work anywhere and can be
deployed quickly, they are unnecessarily expensive for most of the country.
Alternative strategies, which in principle might involve new large-scale subsidised
operators selected by international competition (as happened in EDR), appear
unrealistic in current circumstances.
We believe that NT has good commercial incentives to carry out at least the first stage
of the plans outlined above.
4.4.2 National objectives for telephone service
For a rural telephone service, we therefore propose the following national objectives:
By mid-2007: Telephone service, at (or near) normal current NT PSTN rates, available
within a week of request, throughout areas covering 85% of Nepals population, 4% of
which will be covered by RTDF.
By 2010: Telephone service, at (or near) normal NT PSTN rates as they will be then,
available within a week of request, throughout areas covering 98% of Nepals population,
3% of which will be covered by RTDF.
Continuing: At least one phone line (PCO) to be installed close to each primary school
location. This is accessed by 89.9% of rural population within 30 minutes, by 97.5%
within one hour, 99.8% within 2 hours (NLSS II).
4.4.3 Strategy for achieving rural telephone objectives
To achieve these objectives we propose the following steps. Here we use the term NTAR to
mean the national supervisory and support body for rural telecom discussed in Section 4.6. In
devising this strategy we have tried to meet the following objectives:
Ensuring that NT fulfils its roll-out plans
Fostering competition to NT in rural areas
Ensuring viability of small competitors
Getting value for money from subsidies.
Achieving any one of these is a challenge. Achieving elements of all four will be a continuing
balancing act, requiring periodic review and adaptation to changing circumstances.
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1. Nepal Telecom should be required to publish its CDMA and Internet coverage plans
annually by the end of each fiscal year, showing in detail the boundaries of expected
service availability by mid-2007. Longer-term plans (in outline) to be available to
NTA, and to the public if requested (for example, at each District Headquarters).
2. Each year, NT should update these plans with rolling plans looking two years ahead in
detail as well as longer-term plans in outline, and showing actual achievement to date.
3. If it is felt necessary, NT should be encouraged to fulfil or exceed these roll-out plans,
which are long due. Such may be taken as its obligation, based on the monopoly rights
it is enjoying in long distance and international telephone services.
4. In principle, RTDF subsidies will be available for providing telephone coverage to rural
areas that are outside NTs planned boundaries for service provision.
5. Beneficiary communities may well group together to get the best value telecom service
using their subsidy funds. NTA (through district level support bodies) will help such
groups to form, and provide them with expert advice on technical options and any
needed help with procurement. Their options may include local entrepreneurs using
new cost-effective technology and inviting existing operators (NT, UTL STM and
Spice) to bid to provide coverage (which could be using fixed or mobile phones or
VSAT terminals) at the lowest price. Any new operations formed by this process would
also have rights to interconnect with NT at an appropriate nearby point, and with each
other. As a contribution to running expenses, they will receive a fair share of the
revenue from incoming calls.
6. Once phone lines are available on demand, a small start-up subsidy for a PCO will be
available to each qualified community (after a suitable waiting period, such as a year, to
discourage inappropriate take-up) if the private sector does not respond with a similar
service.
4.5 Objectives for public Internet access points
Demand for Internet service in rural Nepal is still very low. However, roll-out of rural
telephone networks will also provide Internet-capable infrastructure. Internet access requires
only suitable end-user equipment, premises and support a significant challenge, but one
which can be met in many different ways, using the demand-driven community-based
approach.
Internet is needed in all District Headquarters for administrative reasons. In order to facilitate
growth of demand and make Internet service accessible to as many people as possible, we
propose fostering public Internet access points (assumed to offer affordable rates) in selected
rural market centres (RMC).
4.5.1 Objectives for Internet access
Therefore, the objectives may be framed along the following lines:
By mid 2006: at least one public Internet access point in each district headquarters town.
By 2008: at least one public Internet access point in each first round selected RMC.
By 2010: at least one public Internet access point in each second round selected RMC.
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The selected RMCs will be identified so as to include the highest reasonable proportions of
the local VDCs populations within their joint hinterlands.
Terrain type To cater for 50% VDCs of district To cater for 75% VDCs of district
(First round?) (Second round?)
Mountains DHQ plus 0 or 1 RMC DHQ plus 1 or 2 RMCs
Hills DHQ plus 1 to 3 RMCs DHQ plus 2 to 6 RMCs
Terai DHQ plus 1 to 3 RMCs DHQ plus 3 to 5 RMCs
We feel that at the moment that no more than this can be justified as a universal provision. Of
course, in many areas greater provision will be achieved by market forces.
This provision could be in many forms. For example, the Post Office may introduce e-post
points; a school or college with Internet access, an Agricultural Information Office or a
community radio base station may offer Internet access to the public. It is up to the DDC to
monitor what is available and what else is needed.
4.5.2 Strategy for achieving public Internet access objectives
In order to achieve the draft objectives above we propose the following strategy:
1. By the end of 2005 or early 2006, each district should identify and publish first and second
round RMCs (for public Internet access points by 2008 and 2010 respectively). In each
DDC,information officers would seem obvious candidates to be trained to incorporate ICT
needs into planning processes.
2. Nepal Telecom is already committed to providing Internet at local rates in all DHQs by
2006. DDCs will automatically benefit from this service, and they should take
responsibility for ensuring that the public can also access the facility.
3. Annually, as part of normal planning processes, each district should report on actual
availability of public Internet access within the district.
4. Normal market forces, plus the demand-driven community-based process put forward
above for increasing access to ICTs, together are likely to lead to some additional public
Internet access points.
5. To strengthen the private ISP sector outside Kathmandu, the RTDF could usefully support
the formation of regional Internet exchanges.
6. In 2007, the NTA, in consultation with districts, should review progress towards the 2008
objective (first round RMCs). Where the objective is still felt to be appropriate and is
unlikely to be achieved without outside help, then subsidies may be offered to help it to be
achieved. Where new network infrastructure is required, a process of community grouping
with central support, similar to that outlined above for telephone infrastructure, should be
followed.
7. Similarly, in 2009, the 2010 objectives (second round RMCs) and progress towards them
should be reviewed, and such subsidies may be offered as seem necessary at the time.
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4.6 Institutional arrangements
The Telecom Act stipulates that Nepal Telecom Authority (NTA) is entirely responsible for
creating and disbursing the Fund for Rural Telecom Development. This will remain the case as
far as telecom facility developments in commercially unviable rural areas are concerned.
However, NTA is required to implement part of the ICT project developed in the current study
with IDA credit available for this purpose under TSRP. Looking ahead, however, we
recommend that NTA should be prepared to pass on the responsibility of managing the
implementation of the ICT project other than the telecom facility during the main period of
expansion of rural ICT access (this could be the next decade or more).
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5 Phase II Pilot Project Design
5.1 Introduction to Phase II activities
This phase of the study in accordance with the terms of reference included the following:
Pilot project design includes appropriate zoning and determining of objective service
levels, analysing the possibility of expanding points of presence, designing
commercially viable ICT projects such as telecentres to be expanded nationally, and
prioritising the projects and preparing methodology and ToRs for the demand study to
follow.
Demand study to be carried out has the main objective of a thorough survey of
selected locations (where pilot projects are to be implemented), which will produce a
detailed description of expectations for services in the rural and under-served urban
areas, the potential demand for new services, and technical, legal and business
constraints for the delivery of additional services.
Demand modelling report has been written as an additional contribution from the
Consultant to Demand Study part of the work.
Design of bidding process includes design of bidding documents necessary for the
projects, preparation of regulatory structure of RTDF and its organisation and
procedures and RTDF manual. We have also included preparation of a draft IFDF (ICT
Facility Development Fund) manual.
5.2 Region-wise objective service levels for telephone and Internet
5.2.1 Categorisation of districts in regions
Starting from the national objective of service levels (telephones and Internet), we proceed to
estimate the service levels for each region categorised on the basis of population density. Each
region, not necessarily contiguous, consists of districts with population densities within a
certain range (Table 3).
TABLE 3: CATEGORY (REGION) OF DISTRICTS IN ACCORDANCE WITH

POPULATION DENSITY RANGE
Population density
Category Number of Mountain Hill Terai
SN range of districts in Remarks
of region districts districts districts districts
the region
1 A 412 5 5 0 0
2 B 3365 12 9 3 0
3 C 80150 17 2 15 0
4 D 151196 16 0 12 4
5 E 204277 9 0 5 4
6 F 319817 14 0 1 13
7 G 18952739 2 0 2 0 Capital
8 Totals 75 16 38 21
Population density = persons per square kilometre
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5.2.2 Region-wise targets for PCOs
Targets for PCOs to be developed under the subsidy network are given in the eighth column of
Table 4 by category of district, ranging from 50% of the total required PCOs in region A to
none in region G.
A large proportion of PCOs would come in the private sector, either franchised by NT or
operated by themselves. It is assumed that in region A, consisting of mountain districts, about
50% may need subsidy while in the easier regions it will be as low as 10%. Category G, the
capital city, will not require any PCO with subsidy. PCOs under subsidy will have to be
established in NTs CDMA network as well as in the new network to be created by NTA with
subsidy. Of all the PCOs to be established with subsidy, the number of PCOs in the NTA-
created new network are assumed to be in proportion to the population covered by that network
and the rest will lie in NTs CDMA network. Under region A, Table 4, column 6 gives the total
of PCOs needed in that region. Twenty per cent of these (covering 20% of the population as
given in column 5) will be in the NTA-created new network (shown in column 9). The figure
representing the difference between column 8 and column 9 is the number of PCOs in NTs
CDMA network which require subsidy. It is assumed that the NTA-created new network under
subsidy will be a VSAT network on the basis of one PCO per terminal.
TABLE 4: NETWORK COVERAGE BY 2010 BY NT AND UNDER SUBSIDY (RTDF),

& ESTIMATE OF PCOS REQUIRED UNDER SUBSIDY
% of pop. covered
% of pop. covered
% of pop. covered
requiring subsidy
requiring subsidy
Subsidised PCOs
in national target
Number of PCOs
network created
PCOs under the
Number of PCO
CDMA network
under the NTs
by NT by 2010
with subsidy
with subsidy
% of PCOs
Number of
locations
districts
network
by 2010
Category of
Region
A 5 70 90 20 529 50 265 106 159

B 12 80 93 13 2657 40 1063 345 718
C 17 85 95 10 6373 25 1593 637 956
D 16 90 98 8 5596 15 839 447 392
E 9 95 100 5 4320 10 432 216 216
F 14 100 100 0 4981 10 498 0 498
G 2 100 100 0 1282 0 0 0 0
Total 75 93 98 5 25738 4690 1752 2938
Costs of PCOs in $
8,760,708 734,465
Costs of PCOs total $ 9,495,173
Assumptions
Population % to be covered by subsidy network contains number of PCOs in proportion to population
All the PCOs are to be established by VSAT network.
Each PCO requires one VSAT terminal
If NT is allowed to extend CDMA network under subsidy this subsidy requirement will decrease
substantially
VSAT terminal cost is assumed to be $5000; PCO in CDMA network is fixed wireless set and solar power
costing $250
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5.2.3 Region-wise targets for public Internet access points (telecentres and cybercafs)
NTs CDMA network will have Internet dial-up facility. NT is also planning to establish
district satellite communication systems to provide connectivity for telephone services as well
as Internet by the year 2006 to those districts where microwave links are not available. In view
of foreseeable low demand of Internet services in DHQs and rural areas, the following
regionwise targets were recommended (Table 5). Public Internet access points are defined as
telecentres to be provided on subsidy under community ownership to rural market centres and
privately owned cybercafs in the DHQs with some government incentives.
TABLE 5: GROWTH OF PUBLIC INTERNET ACCESS POINTS IN DHQS AND RMCS
By 2008 in RMCs
By 2010 in RMCs
Mountain districts
By 2006 in DHQs
Density (psqkm)
Total PIAPs per

Terai districts
Total PIAPs
Category of
Hill districts
Population
Region
Range
district
SN
1 A 412 5 0 0 1 0 1 2 10
2 B 3365 9 3 0 1 1 2 3 36
3 C 80150 2 15 0 1 2 3 4 68
4
D 151196 0 12 4 1 2 4 5 80
5 E 204277 0 5 4 1 2 5 6 54
6 F 319817 0 1 13 1 2 6 7 98
7 G 18952739 0 2 0 Several Several Several Several
73 124 273
8 Totals 16 38 21 346
+several +several +several
5.3 ICT projects, pilot projects and implementation modalities

In the following sections we will present ICT projects other than telecentres or cybercafs that
are important for increasing ICT access to the rural communities in particular. Capacity
building facilities in rural areas such as provision of computers with Internet access to schools,
and proven cost-effective communication media such as community radio for community
development, are also proposed to be taken up on a longer term basis.
For increasing Internet Point of Presence in the rural areas, a regulatory instrument to permit
any user to access their choice of ISP located within a development region at local dial-up rate
and other incentives for small ISPs would go a long way. Therefore, we have currently
recommended only one type of assistance, to ISPAN for expanding Internet switching in the
regional centres.
In the pilot phase, all the project components, cybercafs, telecentres, computers and Internet
for schools, including regional Internet switching, are proposed to be taken up for
implementation, while community radio will have to wait for some time. The telephone
infrastructure project (PCOs included) to be provided with RTDF can wait for a year or two as
massive CDMA and district satellite network expansion of NT is under implementation now.
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5.3.1 Cybercafs in DHQs
Cybercafs are proposed as private entrepreneur owned multifunctional businesses with the
view to making them viable in a small town. Primarily aimed at providing Internet access
facility, they can be made capable of providing computer hardware, software maintenance, and
training in applications and use of computers. The reason to combine all these functions in one
unit makes good business sense in a DHQ, while demand for particular ICT-related service is
small. The various ICT projects planned to be launched in the districts would greatly benefit
from such services being close at hand.
Modalities of working in establishing cybercafs in DHQs
The following modalities could be adopted while working in collaboration with RUPP
(municipality) in establishing cybercafs in DHQs during the pilot phase. However, in the
longer term collaboration will be required with DLGSP (DDC) as well because of their
presence in all the districts. NTA is advised to work with DLGSP in the districts where RUPP
is not present.
Municipalities and TLO will be informed about the purpose of the cybercafs and the
basic requirements as to how they could function.
RUPP/TLO will nominate an appropriate person who is a member of the TLO willing
to establish and run a cybercaf in the municipality (DHQ).
In the DHQs, entrepreneurs or their staff will be trained, at a cost to the project, on
operation and basic maintenance of computer hardware/software and running of
cybercafs in the pilot phase.
If required, a small loan will be provided to the entrepreneur, under the terms and
conditions applicable in lending from the fund instituted by the RUPP/MLD, on the
usual terms applicable for such loans in the TLO.
RUPP/municipality will monitor the progress of the project.
5.3.2 Public Internet access points (telecentres)
Telecentres aimed primarily at providing Internet access in RMCs are proposed to be

established, utilising useful lessons learnt from the earlier telecentre projects in order to make
them sustainable.
Operational modalities of telecentres

The TLOs in RMCs and municipalities will be informed about the purpose of the
telecentres and the basic requirements as to how they could function. The information
will also include the longer term objectives and strategies of ICT development in rural
and peri-urban areas and how RMC, municipalities and DDC could contribute. RMC
and DDC will participate in the preparation of the annual plan.
The TLO in the RMC will nominate members from the community and form a
telecentre user committee.
The telecentre user committee will nominate one person initially to manage and operate
the telecentre.
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5.3.3 Computers and Internet for Schools Project
This project will try to bridge the digital gap between those students who attend private schools
with computer and Internet facilities and those who attend government schools without such
facilities. The strategy workshop also emphasised that introducing computers in schools would
be the single most important step in the direction of building capability to use and benefit from
ICTs in rural areas. Table 6 gives the number of schools covered by the project.
TABLE 6: SECONDARY AND LOWER SECONDARY SCHOOLS (2004)
Secondary
Types Students Students/ss
school (ss)
Aided 2291 429978 188
Unaided 967 79301 82
Total 3258 509279 156
Institutional (private schools) 1289 34485 27
Lower secondary
Aided 3759 1042617 277
Unaided 1905 253678 133
Total 5664 1296295
Objective and targets
Provide 80% of lower secondary schools and 100% of higher secondary schools and above
with computers and Internet by the year 2015.
1. Target 1: By 2007, provide computers to secondary schools or higher wherever there is
electricity supply and local competence and interest. This target is divided into sub-
targets:
a. Sub-target 1.1 (pilot phase): In the pilot phase, the high schools will generally be
chosen in those districts where cybercafs are being established in the DHQs and
market centres are being provided with PIAPs. About 20 schools in each district
will be taken up. This will be implemented within a year (200506).
b. Sub-target 1.2 (year 2006): 160 schools under the pilot project.
c. Sub-target 1.3 (year 2007): 320 schools under the normal project.
d. Sub-target 1.4 (year 2008): 640 schools under the normal project; the majority of
these will be in the Kathmandu Valley.
2. Target 2: By 2008, provide Internet access on request to schools already equipped with
computers. The implementation of this target will take place simultaneously as
computers are installed in schools in areas where Internet is available, or Internet access
will follow as connectivity becomes available.
3. Target 3: By 2009, provide computers and Internet access to 25% of secondary
schools, using solar power where no electricity is available. This target is to be fulfilled
in the period 200809.
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4. Target 4: By 2012, provide computers to 90% of secondary schools. By the year 2012
secondary schools will have more than 5 computers per school than originally
provided
5. Target 5: By 2015, provide 100% of secondary schools and, say, 80% of lower
secondary schools with computer and Internet access. By the year 2015 nearly all
students down to lower secondary level should have access to computers for
educational purposes.
Modality of implementation of Computers and Internet for Schools Project
Five computers per school are hardly adequate compared with the number of students. As the
cost of the project with entirely new equipment would be very high, it is proposed to start with
used though not outdated equipment. In the beginning, the project will obtain donations
from International NGOs. Later, it may be possible to supplement these with locally donated
equipment. The implementation of this project will be extensive and on a demand driven basis.
In order to kick start with a substantial volume of operation, NTA is advised strongly to work
with national NGOs with experience in this type of work. Alternatively, computers can be
bought locally using available IDA credit, which is the preference of the World Bank.
In summary, the following modality of working is to be adopted if NTA chooses to work with
donated equipment. The working relation with a national NGO will still be maintained.
NTA shall work with one selected national level NGO.
NTA will provide the funds necessary to import used computers for the project.
The NGO will manage the entire project:
o Import of equipment, safe keeping during the progress of work, purchase of all
locally procured components of the equipment required for installation
o Refurbishing, if required
o Communicating with district authorities for selection of schools, for monitoring after
the installation is complete, and ensuring that courses start in the schools
o Collecting the required contributions from schools for meeting some part of the
project costs
o Ensuring equipment is installed and teachers trained.
A tripartite MoU among the International NGO which provides the computers, the
national NGO and NTA will be drawn up. Each entity will bear their respective
responsibility and obligation within the project.
The national NGO will also develop local NGOs, wherever possible, and divide the
implementation responsibility among them.
DDCs, DEOs and VDCs will have to report annually the progress made by the schools in
computer education.
The project will provide Internet connectivity when it becomes available and will pay
some amount for the first year.
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5.3.4 Community radios
There are 56 FM radio licensees including Radio Nepal, out of which 46 are operational.
Thirty-six of these stations are commercial whereas 16 are community radios. The CR of
Madan Pokhara (CRM) has focused on 23 VDCs and one municipality, though service covers
65 VDCs. It is estimated that CRM has about 500,000 listeners, and has extensive peoples
participation. The general assembly of a community radio (e.g. CRM) comprises
representatives of listeners, community and grassroots organisations, professional
organisations, friends of CRM, life-members and intellectuals. Programmes include discussion
on local issues and development news of local interest. Entertainment and promotion of local
culture are also among its main objectives.
By 2010, 25 community radio stations are to be added to ensure reasonable geographical

distribution and population coverage throughout the country. Five community radios should be
established each year for the coming five years. Piloting of this item is not necessary. It is
recommended that NTA work with the Association of Community Radios for this
implementation. Criteria for selection and provision of assistance and monitoring of the entire
project can be easily developed through this association or the community radio support unit of
NFEJ.
5.3.5 Regional Internet exchanges facilities under ISPAN (nPIX)
There is growing need for exchanging traffic among users of services of national ISPs locally.
This project component is aimed at extending the peering arrangement among ISPs including
in other major towns besides Kathmandu. nPIX (ISPAN) is an association of ISPs working to
build Internet switching facilities in the country. So far nPIX (ISPAN) facilities have been built
using donations. Therefore, it is proposed that nPIX (ISPAN) be helped for developing some
local switching facility and training small ISPs to enhance their capacity to understand the
BGP technology and to be able to peer. This project includes equipment provision and
installation, training the ISPs and some wage allocations.
Modalities of implementation
As long as local competitive bidding is adopted in the project for services and equipment,
payment for these items could be done directly to the bidders on the basis of their performance.
Payment for wages and other items may have to be borne by nPIX (ISPAN) from some other
resources. Therefore, it is recommended that nPIX (ISPAN) performs its task through local
competitive bidding.
5.4 Basic considerations for pilot project design
5.4.1 Purpose of the pilot project
There is a variety of possible ways in which the pilot project may contribute to a longer-term
strategy. For example:
Demonstrating a variety of successful ICT development paths (such as some of the
illustrations in Section 6.2 of the strategy report, or others).
Building awareness of ICTs and their applications in rural Nepal.
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Devising criteria to help the authorities to allocate limited subsidy funds fairly and
appropriately among deserving projects.
Producing initial working drafts of support materials for applicants for funds, as well as
the procedures needed by people who are responsible for disbursing funds.
Quantifying appropriate subsidy levels for different types of activity.
Boosting ICT demand in certain areas, which will encourage non-subsidised provision
of infrastructure.
Piloting institutional structures.
Testing certain business models or technologies.
5.4.2 Clustering of project components district-wise
With the decentralisation of authority of line ministries and devolution of political power the
districts have become very important units for local level development activities. The
implementation of all project components of ICT on a district basis has the following purposes
and advantages:
If rural ICT projects belong to the district level, they can fit in the total scheme of
planning and implementation in which DDC and concerned VDCs are involved.
By clustering ICT projects district-wise, sizable work opportunity can be generated.
This will be conducive for development of local entrepreneurship to provide computer
related hardware and software services. It will also create local employment and reduce
the cost of ICT implementation, thus contributing sustainability to ICT projects.
For projects to be sustainable, it is necessary that the operation, maintenance and
supply of hardware and software services are close at hand for ICT projects and
services. The logical location of such facilities for VDCs of a district is its DHQ.
Districts are required to develop the capabilities for implementation, operation and
support of ICT related projects in the private sector and NGOs as well as in the public
sector. This is particularly lacking in the small DHQs. Through DLGSP, capacity of
DDCs is being enhanced; similarly through RUPP, a number of partner municipalities
have developed information centres at DHQ/municipal levels and telecentres at the
RMCs. Therefore collaboration with RUPP (municipality) and DLGSP (DDC) in
creating public Internet access facility at DHQs and RMCs by clustering on district
basis will be very advantageous in reducing the cost and effort of implementation and
supervision of the projects.
5.4.3 Selection of districts for pilot project
The districts chosen for pilot projects are eight in number, namely Ilam, Dhankuta, Gorkha,
Dang, Bardia, Surkhet, Doti and Kanchanpur. In the pilot project, an effort will be made to
create demand for cybercafs in DHQs (municipalities) and telecentres in RMCs of these eight
districts. In the pilot phase, these districts were chosen to take advantage of the existing
information centres and telecentre project management capabilities developed in the DHQs /
municipalities under RUPP. We are already witnessing the birth of cybercafs in a number of
DHQs since the introduction of local dial-up rates in October 2004. In three districts
(Dhankuta, Bardia and Doti), cybercafs have not come up yet in DHQs.
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TABLE 7: DISTRICTS WHERE CYBERCAFES AND TELECENTRES ARE PROPOSED
Existing DHQ Pilot project

District DHQ Pilot project RMC telecentre
cybercaf DHQ cybercaf
Ilam Ilam Yes No Early, if supported locally
Gorkha Gorkha Yes No Early, if supported locally
Dang Ghorahi Yes No Early, if supported locally
Surkhet Birendra Nagar Yes No Early, if supported locally
Kanchanpur Mahendra Nagar Yes No Early, if supported locally
Bardia Guleria No Yes Early, if supported locally
Doti Silgadhi No Yes Early, if supported locally
Dhankuta Dhankuta No Yes Early, if supported locally
Regional Internet switching facilities are proposed at Biratnagar, Pokhara, Bhairahawa/Butwal

and Nepalgunj. Another two sites that nPIX may consider after further examination are Birgunj
and Dhangadi. This component is largely independent of the rest of the pilot project.
5.5 Cost estimates for the full ICT programme (20052010)

In order to arrive at the cost estimates for the proposed full ICT programme, estimates of
individual projects were worked out initially. A summary of these costs is presented in Table
10, all of which represents the subsidy required for the period 20052010 in ICT. The cost
estimates for the project components for the pilot project phase are presented in Section 5.5.5
and Table 11.
5.5.1 Cost estimates of PCOs under subsidy (RTDF)
Here it is assumed that the network created with RTDF will be the VSAT network which is
coming to the fringe areas where population is to be covered by PCOs alone. One terminal is
needed per PCO in the VSAT network, subsidy for which is estimated at $5000 (terminal or
PCO). PCOs requiring subsidy to be located within NTs CDMA network will only require
terminal equipment (CDMA set) to be provided under the subsidy. This is estimated at $250
per site. Table 4 gives the details of the calculation. The total cost estimate of the VSAT
network (PCOs included) and PCOs in NTs CDMA network is US$9,495,173.
5.5.2 Cost estimate of cybercafs in DHQs and telecentres in RMC
Table 8 presents an estimate of the total cost for the Internet access facilities given above in
Table 5. The unit cost applied in the pilot phase is based on the present suggestions where
RUPP is proposed to be one of the collaborating partners. Installation cost is not included in
the estimates. Therefore, the cost beyond pilot project includes slightly higher per unit figures.
The total cost of the Internet access facilities is estimated to be Rs. 87,783,120.
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TABLE 8: TOTAL COST ESTIMATES OF CYBERCAFES AT DHQS AND TELECENTRES AT RMCS
Cost of cybercafs at DHQs and costs of telecentres

at RMCs all in Rs.
Cost Cost
Pilot project Cost in added added
Description Unit price Numbers cost 2006/2007 2007/2008 2009/2010 Total cost
1.0 Cybercafes by in
DHQs
1.1 In private sector
(training on
33,000 15 495,000 495,000
management +
computers)
1.2 In private sector but
more assistance 60,000 24 1,440,000 1,440,000
including training
1.3 No help required - 10
included in
1.4 pilot 3
2.2
2.0 Telecentres by 2008
2.1 Telecentre
establishment & one 312,000 113 35,256,000 35,256,000
year cost
2.2 Pilot lump for 13
4,104,120 1 lot 4,104,120 4,104,120
telecentres
3.0 Telecentres added by
2010
3.1 Telecentre
establishment & one 312000 149 46,488,000 46,488,000
year cost
3.2 Support costs
4,104,120 1,935,000 35,256,000 46,488,000 87,783,120
Assumptions:
1. Training costs are higher in future because it will be a little more than what is included in pilot
2. Telecentre training costs are also slightly higher if RUPP is not assisting beyond pilot
5.5.3 Cost estimates of other projects
Community radio
The projects can be implemented on a cost sharing basis. A contribution of about $20,000 from
the project per community radio station will be required. The total cost to the subsidy would be
about $500,000 for 25 community radios up to the year 2010.
Computers and Internet for Schools Project
The cost for this project has been recalculated as below based on the costs given in Annex-9 of
the Pilot Project Design Report. Here it has been assumed that the schools will not bear any
cost from the year 2009 onwards, as the schools participating in the project beyond year 2008
are assumed not to be able to bear expenses due to their conditions.
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TABLE 9: COST FOR COMPUTERS AND INTERNET FOR SCHOOLS PROJECT
2006 2007 2008 2009 2010 20062010

Number of higher secondary
schools covered 160 320 640 640 640 2400
Computer sourcing,
administrative, testing,
packaging to be sent to WCE
and CAI Overseas
3,800,000 7,600,000 15,200,000 15,200,000 15,200,000 57,000,000

International and national ocean
and land shipping
932,000 1,864,000 3,728,000 3,728,000 3,728,000 13,980,000
Training and local capacity
building
800,000 1,600,000 3,200,000 3,200,000 3,200,000 12,000,000
Borne by schools
(Administration, installation,
additional parts and printers and
equipment, follow up etc.)
4,625,600 9,251,200 18,502,400 32,379,200
Others/contingencies
480,000 960,000 1,920,000 1,920,000 1,920,000 7,200,000
Total Costs 10,637,600 21,275,200 42,550,400 24,048,000 24,048,000 122,559,200

Borne by the project
90,180,000
Regional Internet switching
Only a one-time cost of Rs 613,800 is necessary for equipment installation and some training.
5.5.4 Summary of subsidy estimate for the full ICT programme (20052010)
In this section the summary of subsidies which may be required in the next five years are
presented. The Computers and Internet for Schools Project depends on the contribution of
schools for almost half of the cost in the early part of the project. However, it will be more
difficult to find the schools contribution at the later part of the project as more unaided (by
government) schools are included. Therefore more subsidies are foreseen in later years for the
schools.
TABLE 10: SUBSIDY REQUIREMENTS IN THE NEXT 5 YEARS FOR THE ICT PROGRAMME
Costs for Costs for

Description of the ICT component (20052010) (20052010)
Rs. $
Subsidy for PCO and network 674,157,283 9,495,173
Public Internet access points (cybercafs in
DHQs & telecentres in RMCs) 87,783,120 1,236,382
Computers and Internet in schools 90,180,000 1,270,141
Community radios 35,500,000 500,000
Regional Internet switching 613,800 8,645
Content development 71,000,000 1,000,000
Total ICT activities 959,234,203 13,855,471
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5.5.5 Summary of the pilot project cost
The summary of the pilot project cost as estimated in Annex-10(C) of the Bidding Process
Design report is given in Table 11. The costs of other collaborating agencies and partners and
the administration and management costs of the project are not included in the summary.
TABLE 11: SUMMARY OF PILOT PROJECT COSTS
S.N. Project component Cost in Rs. Remarks
1 Cybercafs in DHQs
Training of 3 persons for 3 cybercafs Included in 2.1
2 Telecentres for maximum of 13 including 5 in institutions
2.1 Training cost for telecentre and cybercafs 228,720
2.2 Telecentre equipment cost 3,588,000

2.3 Telecentre operation cost only for 8, not for
192,000
institutions (Rs 24000/per centre)
2.4 One year Internet cost only for 8 as above @ Rs
96,000
12000 per annum per centre
2.5 Equipment installation cost by RUPP RUPP cost not shown

2.6 Post installation supervision and monitoring and
RUPP cost not shown
support by RUPP
Subtotal 4,104,120 Borne by the project
3 Computers and Internet in schools

3.1 Ocean transport, admin and refurbishing cost of
4,138,590 borne by the Project
computers for 160 schools
3.2 Cost of local purchases, installation, training, and
4,674,000 Borne by schools
project management
3.3 Cost borne by schools for accommodation, furniture,
Not shown
and wiring and travel and living cost by schools
Subtotal 8,812,590
4 Regional Internet exchanges by npIX
4.1 Cost of infrastructures for switches in five locations 597,000
4.2 Cost of training of ISPs in 8 places 16,800
Subtotal 613,800 Borne by the project
5 Total pilot project cost borne by the project 8,856,510
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5.5.6 Time Schedule of pilot project activities
The time schedule is presented in Table 12.
TABLE 12: TIME SCHEDULE OF THE PROJECTS
s.n. Project and Activities Months/1 2 3 4 5 6 7 8 9 10 11 12 13 14
1 AA. Cybercafes in DHQs

1. MoU between NTA and RUPP X
2. Info-social mobilisation in DHOs by RUPP X x
3. Selection of private entrepreneur x x
4. Loan arrangement By CBO/RUPP x x
5. Trainer selection x x
6. Training of entrepreneurs x x x
7. Establishment of cybercaf x x x x
2a. BB.1. Telecentres in RMCs

1. Info-social mobilization X x x
2. Formation of user committee X x x
3. Selection of telecentre operator/manager X x x x
3. Selection of trainer x x
4. Training of telecentre operator x x x
5. Purchase of hardware software x x x x
6. Installation of hardware software x x x
7. Reports of commissioning x x x
2b. BB.2 Telecentres in institutions

1. MoU between NTA and the institutions X
2. Selection of the sites x x
4. Selection of trainer x x
5. Training of telecentre operator x x x
7. Installation and commissioning x x x
3 CC. Computers and Internet in schools

1. Selection of national NGO to work with X x x
2. MoU between NTA and international NGO x x
3. Selection of schools (NNGO) x x x x x
4. Ordering of the equipment x x
5. Equipment arrival x x x
6. Local purchases (NNGO) x x
7. Selection of trainer/s x x x
8. Teachers and training x x
9. Readying schools for receiving the equipment x x x
10. Installations x x x x
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11. Reports of commissioning x x x x
4 DD. Regional Internet exchanges by NPIX

1. MoU between NTA and nPIX x
2. nPIX to submit bidding docs to NTA x x
3. nPIX procures equipment/software x x x x
4. nPIX gets equipment installed x x x
5. nPIX procures training service x x
6. Training of ISP on BGP technology for peering x x x
7. Commission of the equipment X
8. Completion reports x
1 2 3 4 5 6 7 8 9 10 11 12 13 14
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6 Phase II Demand Study
6.1 Terms of Reference, methodology and sample survey for Demand

Study
6.1.1 Terms of Reference
For convenience, Box 1 below reproduces the passage from the Terms of Reference which
describes the demand study, with the original bullet points numbered and in some cases split.
Box 1 Extract from Terms of Reference for Demand Study
The demand study will be based on a thorough survey of selected locations, as described below, which will
produce a detailed description of expectations for services in the rural and under served urban areas, the potential
demand for new services, and technical, legal and business constraints for the delivery of additional services
[copied below as not otherwise covered]. The potential level of telecommunication and information services
utilisation in Nepal should be described in detail based on a demand study including three different scenarios
(urban, semi-urban and rural). Each scenario should include at least three surveys of the most populated areas
within each scenario, according to the National Census. Utilisation estimates will include a prioritisation of
telecommunication needs, such as:
1. Priority customers, such as administrative centres, hospitals, police stations, post offices, Internet service
providers, schools, businesses, etc.;
2. Appropriate extension and connections to the national backbone network;
3. Analysis of the users payment ability and
4. the types of demanded services;
5. Required service levels and transmission capacity for towns and villages in different sizes, segments, and/or
at different levels in the administrative hierarchy, based on
6. estimates of demand for different services, from voice to Internet access;
7. Appropriate policy targets for the desired service levels, such as minimum acceptable distances (in km or
hours of walking) from the nearest public communication point, numbers and sizes of villages/towns for which
it is achievable to have at least one payphone and/or one telecentre within a specified number of years, as
well as
8. Estimated cost of this deployment;
9. Technical, legal and business constraints for the delivery of additional services.
6.1.2 Methodology
The above requirements were fulfilled by following different types of activities:

1. Exploitation of existing relevant survey results relating to households telecom demand
(from the National Living Standards Survey II and the APT/SECEN study),
supplemented where necessary by further similar household surveys and surveys of
business/institutional users. These give a good idea of existing usage patterns.
2. Acquisition of local records of commercial and institutional establishments and their
ICT use, for example from DLGSP, Chambers of Commerce and Nepal Telecom.
3. Discussion groups of local people and in-depth interviews with business and
professional people in each locality. These are the best tool for finding out about likely
future demand and perceived constraints.
4. Discussions of network design with technical experts, including those from Nepal
Telecom.
5. Subsequent analysis of findings, combined with earlier project findings.
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Table 13 shows how each type of activity contributed towards fulfilling each requirement
(yes means that this activity contributes to fulfilling the requirement).
TABLE 13: ACTIVITIES TO FULFIL REQUIREMENTS OF TOR
Local records
groups, depth
Existing/new
discussions
Discussion
interviews
Technical
Analysis
surveys
Comment
D
B
E
1. Priority customers Yes Yes Maybe Closely related to
pilot planning
2. Backbone extension Yes Yes
3. Users payment Yes Yes Yes Already well surveyed
ability
4. Future service Useful Yes
demand findings
already from
APT/SECEN
5. Service levels and Yes Yes
capacity
6. Service demand Yes Aggregation and
projection of demand
findings
7. Policy targets Yes Yes Already proposed
nationally, discuss
local applicability
8. Costs of achieving Yes Estimates to follow
targets rest of work
9. Constraints Yes Yes Constraints already
set out in strategy,
discuss local validity
10. Comment New work Straight Most new
should focus forward value here
on business
users
6.2 Field work and analysis carried out
6.2.1 Areas selected for Demand Study
The field work consisted of visiting:

Four municipalities, namely Mahendra Nagar (in Kanchanpur district), Ghorahi and
Tulsipur (in Dang district) and Ilam (in Ilam district) as urban centres. Tulsipur
municipality was visited because Narayanpur market centre chosen belonged to
Tulsipur municipality.
Two market centres in each district. These market centres (VDCs) were Chandani
(Chandani VDC) and Babathan (Dodhara VDC) in Kanchanpur, Lamahi (Chailahi
VDC) and Narayanpur (Narayanpur VDC) in Dang district and Biblyate (Barbote
VDC) and Fikkal Bazaar (Fikkal VDC) in Ilam district. Chandani and Dodhara VDCs
were substitutes to earlier proposed Jhalari and Dajee VDCs due to prevailing security
situations as guided by the municipality (RUPP) in Mahendra Nagar.
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The survey area selected from each market centre was along the lines of the ToR, that is, the
core area of the VDCs. These core areas are called market centres. Wherever the municipality
had fixed the rural market centre under the RUPP programme, the area was well delineated and
included a well defined number of households. The households included for the survey
included also some from the periphery of the actual market. The four rural market centres
chosen from Kanchanpur and Dang districts belong to this category. The two market centres of
Ilam had not yet been formally chosen as RMCs by Ilam municipality and the numbers of
households that belong to these market centres have not yet been determined.
6.2.2 Fieldwork
The field work consisted of the following:

Collection of latest available municipal profile (information) from three municipalities
at DHQs of the districts concerned.
Collection of data of market centres (VDCs) as available.
Household survey of a number of sample households ranging from 88 to121 in number
from each of the six market centres (core market area of VDCs), to supplement the
information that was already available from the CCI or municipalities.
Collection of historical telephone demand data from Nepal Telecom.
Collection of data related to cybercafs and computer training facilities in the
municipalities.
Collection of data on Internet service from ISPs (mainly NT) in the municipalities
concerned.
Carrying out group discussions in the municipalities and the market centres of the
VDCs. In each municipality, two groups were formed for discussion: one consisting of
businessmen, teachers, government officers, journalists and NGO leaders, termed as the
professional group; and the other consisting of younger people, students and younger
professionals, termed as the youth group. In Mahendra Nagar municipality one
additional group of TLO members, with the majority belonging to the Dalit community,
was also formed.
In each market centre one group of businessmen, school teachers, NGOs, TLO leaders
and farmers was formed for discussion.
A limited number of questionnaires was distributed to respondents of the discussion
groups in the municipalities to obtain information to determine ICT use and future
demand expected.
Discussion with local in-charge of NT in the municipalities to determine the supply and
demand situation, the status of the physical telecom network and service quality.
Further discussion with infrastructure planners of NT.
6.3 Conclusions of discussion groups and analysis of survey data
Based on information obtained from municipal profiles and description of rural market centres,
summary descriptions of three municipalities and their six market centres were written up.
Similarly, from discussion groups, information about their ICT needs and their opinions of
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demand for telephones in municipalities and the VDC of surveyed market centres were
obtained. Opinions on demand for computers and mobile phones for municipalities were
collected from the discussion groups formed in the municipalities. Analysis of the survey data
and conclusions are all presented in detail in the Demand Study Report Volume I.
6.4 Demand projections
6.4.1 Telephone demand projection of locations surveyed
Demand projection of telephones has been attempted in two ways:

One based on the historical data of telephone connections and waiting list of Nepal
Telecom.
The other based on a survey of locations, which included:
o collection of data about the locations
o conclusions of discussion groups formed
o specific ICT data collected from the respondents of the discussion groups
o data collected from household survey of RMCs.
Estimates based on information gathered from discussion groups
Information was gathered in the following two ways:

In the first case, opinion of discussion groups on likely demand for telephones in the
locations concerned was collected. This procedure was adopted in all locations,
municipalities as well as rural market centres.
In the second case, response was sought from respondents in the questionnaire to
determine ICT demand. This method was only applied to the municipalities.
In the first case, the reasonableness of opinions expressed in groups about the demand was
examined further by household survey analysis in the case of RMCs. Based on conclusions of
household surveys conducted, demand for telephones was estimated as a percentage of the
households likely to have telephones.
For municipalities, the questionnaire was designed to obtain estimate how many years it would
be before 50% of households and 100% of business would need telephones. Analysis showed
that personal responses in the questionnaires reflected slightly lower demand for telephones
compared with what was collectively shared in the groups. Combining the households demand
for telephones as expressed in the opinions with that of demand of business, the average total
demand expressed in terms of percentage of households requiring telephone seems quite
reasonable.
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TABLE 14: OPINIONS DURING THE DISCUSSION IN GROUPS ABOUT TELEPHONE DEMAND
Estimated
Locations / groups Mixed group(RMCs) Professionals Youth Dalit group
By the study
Babathan 1/3 of households 25%
Chandani 2530% of house holds 25%
Lamahi 3035 % of households 35%
Narayanpur 30% of households 30%
Biblyate 3540% of households 35%
Fikkal 3540% of households 40%
50% of PCOs
Mahendra Nagar X 50%
households needed
5060% of
Tribhuwan Nagar X 55%
households
6070 % of
Ilam X 60%
households
Estimates based on replies of respondents of discussion groups in municipalities
The opinion of the respondents of discussion groups about the telephone demand is
summarised in Table 15. There is a prevailing view that 50% of households and 100% of the
businesses would take up the telephone within a year if it were available.
TABLE 15: TELEPHONE DEMAND AS EXPRESSED BY THE RESPONDENTS OF

THE DISCUSSION GROUPS
Mahendra Nagar Tribhuwan Nagar Ilam

Professional
Professional
Professional
Youth
Youth
Youth
100% of business
100% of business
100% of business
100% of business
100% of business
100% of business
50% of HH
50% of HH
50% of HH
50% of HH
50% of HH
50% of HH
Opinion/ telephone
demand
% of respondents think
33% 50 100 100 70% 80 67% 73 60% 60 55% 30
now
55% 70 90% 90 93% 93 90% 73 73% 70
within a year
80 100 90 82
within two years
100% 100 100% 100
within three years
Demand on the basis of the historical telephone data of NT
Based on the historical data, the demand of telephones for a particular year has been taken as
the sum of the telephone connections and waiting list for that year. These figures have been
presented in the last column of Table 16 for each location.
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Demand estimated from survey estimates and historical data of NT
In summary, the demand figures which are estimated from discussion and on analysis of
economic status of locations are given as a percentage of the total households of that location.
Table 16 presents this estimate for the year 2005 and also provides demand of telephones
worked out from NTs data applying the growth rate calculated for 2005 for comparison.
However, the demand figure projected by the study based on all this information is the one
which is expressed as percentage of households of that location given in column 6 of the
table.
The demand study of these locations does give some idea as to how the national demand will
be, but it cannot be extrapolated with reasonable confidence limits.
TABLE 16: DEMAND OF TELEPHONES BASED ON DISCUSSION GROUPS AND

NEPAL TELECOM DATA
Expected Demand as of NT
Population 2005
demand data
Telephones needed by 2005 as
Telephone demand 2004 from
Telephones needed by 2005

Telephone growth rate (NT)
Population growth factor
from NTs historical data

Demand as % of household
Number of households
Population
estimated
NTs data
S.N. Name of the location
1 Mahendra Nagar 15253 89755 1.03 50 7627 5551 8 5995
2 Chandani 3215 18286 1.02 25 804
3 Dodhara 3182 20141 1.02 25 796
4 Tribhuwan Nagar 10444 50354 1.04 55 5744 4507 15 5183
5 Narayanpur 2288 14077 1.02 30 686
6 Chailahi (Lamahi) 2974 17330 1.02 35 1041 900 19 1071
7 Ilam 4349 17624 1.02 60 2610 2225 15 2559
8 Barbote 1266 6366 1.02 35 443
9 Fikkal 2310 10919 1.02 40 924 1036 28 1326
10 Municipal average 30047 157733 53 15980
11 Rural market centre average 15235 87118 31 4694
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6.4.2 Demand for other services mobile telephones, computers and Internet
Mobile telephone and computer use
In order to gauge demand for new technologies, selected members of discussion groups were
also asked questions regarding mobile phones and computer demand. Purposely questions for
demand for Internet were left out because it would have been difficult to gather enough
information due to its low use. The question for mobile telephones was: When would 10% of
households and 25% of the business take up mobile phones? The majority think that this is
likely to happen within a year.
For computers the question was: When would 10% of households and 20% of businesses need
computers? With the exception of Ilam, 6087% think that it will happen within one year. In
the case of Ilam, less than 50% of both the groups think that it will happen within a year, for
both mobile telephones and computers.
TABLE 17: MOBILE PHONE AND COMPUTER DEMAND EXPRESSED BY RESPONDENTS
Demand expressed by the respondents % think now % think within a year

25% HH 40 67
Professional
MOBILE
50% Business 40 50
10% HH 60 80
Computer
20% Business 30 80
Mahendra Nagar
25% HH 83
MOBILE
Youth
50% Business 90
10% HH 73
Computer
20% Business 100
25% HH 60 80
Professional
MOBILE
50% Business 60 80
10% HH 50 80
Computer
20% Business 50 80
Tribhuwan Nagar
25% HH 53 60
MOBILE
Youth
50% Business 60 67
10% HH 73 87
Computer
20% Business 73 87
25% HH 33 57
Professional
MOBILE
50% Business 33 67
10% HH 47 90
Computer
20% Business 33 47
Ilam
25% HH 10 50
MOBILE
Youth
50% Business 27 64
10% HH 36 55
Computer
20% Business 36 45
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Internet and email
Internet and email use is just catching on. Table 18 shows how NTs Internet connections are
increasing in various locations since local dial-up rates were introduced by NT in the
districts and rural areas. In fact the increase is mainly due to outlying districts now having
dial-up access at local rate. The increase of about 2,600 customers (by 70%) over 14 months
is mainly the contribution of customers from districts where email and Internet service was
either not available at all or not available at local rates. This shows that growth in Internet
email services can be greatly enhanced by regulatory and promotional means. The attention
of government and the regulator is drawn to this fact. The number of cybercafs that can be
witnessed in the municipality shows that these are becoming popular among the youngsters.
However, actual growth prediction in rural areas and districts is a difficult task.
TABLE 18: INCREASE IN EMAIL AND INTERNET CUSTOMERS OF NT
No. of Customers No. of Customers

S.N. POP
(August 2004) (October 6, 2005)
1 Kathmandu 2271 3257
Banepa 128
2 Bharatpur 64 137
3 Pokhara 203 332
4 Biratnagar 446 553
Bhadrapur 284
5 Bhairahawa 92 357
6 Dharan 151 166
7 Hetauda 150 344
Janakpur 150
8 Nepalgunj 349 655
ISDN 8
3728 6371
Total
(Up to Bhadra)
6.5 Required service levels and transmission capacities to national

backbones
6.5.1 Telecom network structure
The telecommunications backbone and power grid more or less follow the EastWest highway
and several NorthSouth main roads. Basically Nepals main telecommunication network until
very recently was dependent on microwave radio systems. The capacity of backbones varies
from 34+34 mbps capacity systems to SDH (2+1) radio system. Lower capacity links to main
backbones are planned to be replaced or enhanced in capacity by adding SDH radio links.
Fibre optic backbone cable was laid last year from the eastern border of Nepal to Lamahi in the
midwestern development region along the highway. This link is expected to be extended up to
the western border of Nepal soon.
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The OPGW (Over Power Ground Wire) fibre link of Nepal Electricity Authority (NEA)
connects Kathmandu and Pokhara to Butwal and Hetauda, forming a ring of fibre optic
backbone. The northsouth secondary backbones connect hilly districts to the main regional
centres in the lowlands through which the main backbones pass.
The district centres and rural market centres are being served by telephone exchanges located
in those centres if demand is sizable; otherwise the small locations are served by MARTS,
VSAT and VHF telephones. The districts are connected directly to backbones or secondary
backbones which connect series of districts. Other rural centres are generally connected to the
district centre via radio links.
Nepal Telecom has an alternative wireless technology called CDMA to provide telephone
services throughout the country. The CDMA system is aimed to provide 1 million subscriber
connections, of which 500,000 subscriber connections are to be completed by July 2007. The
new system will virtually cover the whole country through three networks with three switching
centres located in Kathmandu (Network I), Bhairahawa (Network II) and Biratnagar (Network
III) for the central, eastern and western parts of the country respectively. Network II and
Network III will have capacity for 150,000 subscribers each, while Network I will have
capacity for 200,000 subscribers by July 2007. These networks together are proposed to be
extended by 500,000 subscribers in the subsequent three years.
GSM mobile phones serving mainly urban centres have also substantial coverage of rural areas
adjacent to towns. Table 19 shows how district centres are generally being connected to
backbones or secondary backbones.
6.5.2 Transmission capacities of the municipal centre under study
Table 19 also gives examples of how municipal centres (district centres) are connected to the
regional centres with the microwave radio relay system. The table shows the existing capacities
and capacities planned to be added soon. These capacities are planned to satisfy the service
level required for increased capacities of telephone exchanges in municipal towns as well as
that required for new CDMA base stations to serve the rural as well as urban areas.
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TABLE 19: NEPAL TELECOMS TRANSMISSION LINKS FROM MUNICIPALITIES AND RMCS TO
THEIR REGIONAL CENTRES
Links from Bhadrapur-Aitabare-Ilam, Fikkal
Locations Locations Capacity Configuration Distance kms
Aitabare Ilam 34 Mb/s 1+0 11.4 Ilam terminal
Aitabare Ilam 8+8 1+1 11.3 Ilam terminal
Bhadrapur Aitabare 34 + 34 1+1 38.7 Regional Centre
Bhadrapur Aitabare 155.5 1+0 38.7 Regional Centre
Aitabare Fikkal 8 1+0 Fikkal terminal

Links from Nepalgunj-Rajakot-Ghorahi (Tribhuwan Nagar),
Narayanpur, Sineghas (Backbone repeater to Lamahi)
Nepalgunj Rajakot 34 Mb/s 1+1 55.4 Regional Centre
Rajakot Ghorahi 34 Mb/s 1+1 30.1 Ghorahi terminal
Nepalgunj Rajakot 140 1+1 55.2 Regional Centre
Nepalgunj Rajakot 155.5 2+1 55.4 Planned
Rajakot Narayanpur 8 1+0 Narayanpur terminal
Sineghas Lamahi 8 1+0 Lamahi terminal
Links from. Dhangadhi-Buretola-Mahendra Nagar
Buretola Mahendra Nagar 34 + 34 1+1 42.3 Mahendra Nagar terminal
Dhangadhi Buretola 34 + 34 1+1 24.8 Regional Centre
Buretola Mahendra Nagar 155.5 1+1 38.7 Planned
Dhangadhi Buretola 155.5 2+1 24.8 Planned
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6.6 Demand modelling
6.6.1 Introduction
The demand modelling activity had following three components:
1. Assembly of available relevant statistics at the District level from various sources,
including:
Census 2001 and other already published official statistics.
Specially commissioned tables produced for this study by experts of the Central
Bureau of Statistics (CBS), drawing on the raw data of the second National Living
Standards Survey 200203 (NLSS2).
Data produced by the SECEN/APT study in 35 districts of demand for ICTs, with
particular reference to Multipurpose Community Telecentres (MCTs).
More detail is provided in the NLSS and APT surveys.
2. Analysis of available data, attempting to understand any underlying patterns of demand

that they might contain, through a specially commissioned regression analysis of
NLSS2 household survey data carried out by experts of CBS.
3. The teams own analysis of the same NLSS2 data integration and presentation of the
previous two components, together with our knowledge of demand modelling
elsewhere, leading to this report.
The assembled data are available as a project deliverable in the form of an Excel spreadsheet.
The two data analyses have provided complementary insights into the structure of the data.
They were always of an exploratory nature, and like other explorations lead to many new
questions which cannot be answered within the constraints of this project. We hope that future
researchers will be able to look further into these questions.
Only the end summary of the demand modelling work is presented here. In order to appreciate
the logic behind this analysis, it is recommended that the full report already submitted should
be studied. It is notable that the results are consistent with the findings of the demand
fieldwork already presented. The approach used should permit demand estimates to be made
with a reasonable level of confidence for any part of the country for which data on household
incomes (or total expenditure) are available.
6.6.2 Demand estimate summary7
Table 20 summarises the total demand figures derived from the NLSS survey, and estimates
what the current fixed line demand might be if there were no supply restrictions that is, if
home phones were available to whoever wanted them, and everyone lived within 30 minutes of
a phone booth. The estimates assume that people of each income level will spend the same
amount on phone service if it is available as other people of the same income level to whom
service is available are already spending. Note that these figures apply to the situation in Nepal
now (or rather at the time of the NLSS survey, 200304). They are not a forecast.
7
Grossing up to national level assumes a round number of 4.5m households
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Because of the small number of survey participants with mobile phones, the survey gives no
basis for estimating demand for mobile phones. If and when mobile phones become widely
available in Nepal, we would expect them (as in other low income countries) to some extent to
substitute for fixed lines. However they also have a strong additional appeal, and will
undoubtedly expand the total market size significantly.
TABLE 20: CURRENT AND POTENTIAL HOUSEHOLD DEMAND FOR FIXED PHONE SERVICE
Estimated
Estimated total Estimated total household
Survey position with
household demand with unrestricted
findings unrestricted
spending now supply (million NR)
supply
Percentage of households
10% 30%
having home facilities
Average regular comms
10,465 8,0008 4,709 million
spending per household with 11,300 million NR/year
NR/year NR/year NR/year
home facilities
Average infrequent comms
770 346 million
spending per household with 500 675 million NR/year
NR/year NR/year
home facilities
Households without home
90% 70%
facilities
Average infrequent comms 186 753 million
250 NR/year 787 million NR/year
spending per household NR/year NR/year
5,808 million
Total 12,762 NR/year
NR/year
8
Reduction from current average spend assumed to account for existing takeup by households with highest
demand
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7 Phase II Design of bidding process and RTDF

manual
7.1 Introduction
The basic task consists of the following:

a To develop the details of institutional requirements identified in the strategy report in
relation with the following required tasks:
Assist in the development of regulatory structure of the RTDF, its organisation and
procedures for its functioning applicable for telecom network and services.
Develop the organisational structure and staffing requirements of the new
autonomous institution called ICT Facility Development Fund (IFDF) required for
the whole spectrum of ICT projects other than telecom infrastructure in rural and
peri-urban areas of Nepal.
b To develop fund operational manuals applicable to both the Funds.
c To design the bidding documents necessary for implementation of pilot projects
components outlined in the pilot project document, including development of MoUs
with other agencies, government and non-government, as foreseen in the strategy
report, which would enable the pilot project to implement ICT projects with community
involvement.
7.2 Institutional requirement for RTDF and IFDF
The Telecom Act stipulates that Nepal Telecom Authority (NTA) is entirely responsible for
creating and disbursing the Rural Telecom Development Fund for building rural telecom
infrastructure where commercial operation is not possible. In the absence of any properly
organised body to carry out major ICT initiatives in the rural and peri-urban areas, it is only
reasonable that NTA manage the activities to create ICT facilities under current IDA credit to
avoid any delays in implementation. Looking ahead, however, we recommend that NTA focus
on its regulatory functions and managing the provision of rural communications infrastructure
requiring subsidy (support) and NTA pass on the responsibility of managing other rural ICT
facilities during the main period of its life, say beyond year 2007, to some other autonomous
agency (which is called IFDF in the discussions to follow). Our reasons are:
The task of assessing and fulfilling rural ICT demand other than rural infrastructure is
varied, large, and requiring community mobilisation. It is thus an onerous task, which
NTA is currently not equipped to perform. Taking on this task could unbalance NTAs
structure and distract it from its proper regulatory functions, and it would not be in the
interest of NTA in the long run.
Many other parties, besides NTA, have a strong and legitimate interest in the outcome.
In particular, the new agency will have to work very closely with MLD, local bodies
such as DDCs and VDCs and directly with the communities concerned.
The Open Workshop agreed that there is a need of an independent and semi-autonomous unit,
suitable for managing subsidies and implementing the programme that focuses on development
of ICTs in rural areas and promotes demand for communication activities in rural areas. There
are good precedents in Nepal for such bodies managing demand driven community based
programmes, including:
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Rural Water Supply and Sanitation Fund Development Board (RWSSFDB)

Alternative Energy Promotion Centre (AEPC)
Poverty Alleviation Fund (PAF) Board
Media Development Fund.
A new governing board (now called IFDF) or body should be institutionalised for fund
management, policy development and development of project format and approval of the ICT
projects other than belonging to rural telecom infrastructure.
Two funds RTDF and IFDF and two organisations
Therefore, we have come up with two funds, namely: RTDF and IFDF. During the
development of strategy, it was identified that RTDF should be managed as it is being done
presently within NTA. However, it was recognised that proper structuring of legal and
organisation aspect of RTDF is necessary. These have been appropriately addressed in the
report.
7.3 Rural Telecommunication Development Fund and the fund manual
In this subsection only the purpose of the manual, the organisation of the RTDF Management
Committee and its organisation and administration of the fund and support principles will be
briefly described. The details are presented in the Report on Bidding Process Design and the
RTDF manual.
7.3.1 Present status of RTDF in NTA

NTA, in its first exercise of rural telecommunications infrastructure development in the eastern
development region, has used an IDA credit. NTA, so far, has not utilised the RTDF generated
from the operators and the detailed rules and procedures for application of RTDF are yet to be
formulated by NTA. A manual for using RTDF has been developed, which describes the legal
structure of the managing body of RTDF along with the procedures and functions. A salient
point of the content of the RTDF manual (Annex-1 in the Design of Bidding Process) which is
presented separately as part of the deliverable of the task under this report is given below.
7.3.2 Purpose of the manual

The RTDF is a fund for supporting telecom infrastructure in those areas in which telecom
service provision on a commercial basis is not available. In addition, part of the RTDF funds
may be used for universal access (public access points) services. Universal access means
public access points focusing on communications services like public phone and public
Internet access and including basic computer terminals with printer, scanner and video camera,
when needed, for transmission and reception of voice/audio, text, images, etc. The fund also
supports development and operation of such services in rural areas.
The manual is designed for the purpose of managing RTDF. It defines the scope of support,
recipients of the support, and methods for defining the amount and the disbursement of the
support. The RTDF support is restricted to the purposes defined in the Act, i.e.
telecommunications in rural areas, and does not cover other ICTs or ICT based services. In this
manual, an organisation structure of the RTDF has been designed as described below.
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7.3.3 Organisation structure of RTDF

The functional organisation structure of the RTDF with relevant functions is shown in Figure
6. However, initially the Fund Manager would require no more than one officer assisting full
time and one or two support staff. Thereafter, the staff required for managing various functions
will depend on the activities it undertakes and the extent of work that is done through
consultants.
RTDF Management
Committee
Advisory Committee
consisting of various
operators
Fund A local bank to
Legal administer the fund
Manager
Advisor on behalf of NTA
Contract Subsidy Support Services

Management Management Division
1
Administration &
finance support
function
FIGURE 6 OVERALL ORGANISATION OF RTDF
7.3.4 RTDF Management Committee (RTDFMC)
The RTDF Management Committee is composed as shown in Table 21.
TABLE 21: COMPOSITION OF RTDFMC
i. Chairperson Chairman of Nepal Telecom Authority 1 seat

ii. Member with background in rural telecom (NTA) 1 seat
iii. Member with background in rural development (External) 1 seat
iv. Member with a background in Consumer Society/Association 1 seat
(External)
v. Member Fund Manager (NTA) 1 seat
Total Members of the RTDF Management Committee 5 Members
Members shall be appointed based on their personal capacity and expertise. Members shall act
solely for the purpose of RTDF and not represent any external party such as the institutions
from which they are appointed. The RTDFMC shall appoint one of the officers in the RTDF as
a secretary to the Management Committee with no voting rights.
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7.3.5 Description of RTDF organisation

The RTDF is proposed to be a semi-autonomous body under NTA. It will be run by a
management committee consisting of 5 members including the Chairman of NTA as
chairperson. At least two members of the committee will be external to NTA.
Procedures of appointment, dismissal and remuneration of RTDFMC members, the
power and duties of RTDFMC, meetings and decisions are described in the manual.
The Chairman of the RTDFMC has the right to disapprove individual decisions of the
RTDFMC based on the ultimate NTA responsibility.
An Advisory Committee to meet twice a year is established with the objective of
enabling the main stakeholders, in particular private and other operators, involved in
use of RTDF, to meet and share information and ideas and to advise the management
committee on how best to improve service delivery and the credibility of RTDF.
A Fund Manager is to be appointed to run the operations of RTDF.
The RTDFMC is to appoint the professional staff.
The fund manager has the right to appoint support staff.
RTDFMC may decide on use of external consultants as required.
7.3.6 Administration of funds and budgeting and plans

The funds of the RTDF shall be administered separately from the NTA funds. Day-to-
day administration of the RTDF funds shall be outsourced to a suitable bank (the RTDF
Bank), with international banking rights. The bank shall be selected based on
competitive tendering for a period of 3 years. The RTDF Bank will take care of
financial management of the fund based on an agreement as a result of the tendering
process.
The RTDF shall prepare an annual report within the same time frame as the NTA
annual report. The RTDF funds shall be audited together with NTA funds, and the
financial statement shall be approved in the same manner as the NTA financial
statement.
The manual describes what the annual work plan should include. It also should include
salient points of the three year rolling plan.
7.3.7 Support principles
Various support principles have been described:

The main support initially is suggested for telecom infrastructure to be based on one
time investment support using maximum coverage for fixed support.
In parallel to the major support forms, support is to be based on competitive tendering.
The RTDFMC shall develop other forms of support for minor projects that can be
implemented with efficient administrative work.
One possibility is standard subsidies for activities of the same type.
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7.3.8 Rural ICT Facility Development Fund (IFDF)
The IFDF is structured based on the discussion presented in Section 7.2 on the need for two
institutions. IFDF is structured in similar way as RTDF. IFDF is proposed as an autonomous
governing body constituted as the IFDF Board to manage the other ICTs. Here we will present
only the basic IFDF organisation. The draft IFDF manual is also included in the report on
Design of Bidding Process.
Organisation
The overall organisation of IFDF is given in Figure 7 below. Once the IFDF starts functioning,
other committees and bodies needed for cooperation and coordination with other agencies will
be formed as required as part of the normal management process.
IFDF Board
Coordination
Committee
Local Bank to
Legal Advisor Executive Director Administer the Fund
Planning and Policy ICT Community Support Services

Division Services Division Services Division Division
1 Policy Expert 1 ICT Expert 1 Community 1 Administration &

2 Associates 2 Associates (officers) Development Expert Finance Officer
(officers) 1 Contact Officer 2 Associates (officers) 2 IT Officer
6 Support Staff
FIGURE 7 OVERALL ORGANISATION OF IFDF
Composition of the Board
The composition of the Board is as shown in Table 22.
TABLE 22: COMPOSITION OF THE IFDF BOARD
i. Chairperson from MOIC or MOST 1 seat

ii. Member, from MOIC or MOST 1 seat
iii. Member, background rural community development 1 seat
iv. Member, background DDC/ADDCN 1 seat
v. Member, Executive Director IFDF 1 seat
Total Members of the IFDF Board 5 Members
Members shall be appointed on the basis of their personal capacity and expertise. Members
shall act solely for the purpose of IFDF and not represent any external party such as the
institutions from which they are appointed. Only one person each from MOIC and MOST will
be in the Board.
The Board shall nominate one officer from the IFDF as secretary to the Board without voting
rights.
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Appointment, dismissal and remuneration of Board members
A member who is absent from two consecutive meetings without a valid reason shall be
dismissed, and a replacement member shall be appointed for the remainder of the period.
Board members shall be remunerated for meetings in which they have participated fully. The
Board shall decide on the remuneration in line with remuneration comparable to the private
sector and INGOs.
Powers and duties of the Board
The Board has the power to decide on tendering and selection of support receivers, and to
decide on other support forms, in line with the relevant policies and policy directives.
The Board has the duty to:

manage tendering processes
manage other support forms
take into account the requirements of tied funds and related cooperation with donors
create standard procedures for tendering and support forms
encourage local institutions and entrepreneurs to participate in the construction,
maintenance and utilisation of ICT services within the scope of IFDF
commission research topics and other initiatives to support usage and utilisation of
ICTs in Nepal, and propose such research topics and initiatives to other relevant
institutions.
7.3.9 Coordination Committee
IFDF shall form a Coordination Committee for policy development. The purpose of the
Coordination Committee is as follows:
Assist IFDF in development of overall policies on information and communication for
rural areas.
Assist IFDF in developing policies and strategies for development of specific sector in
ICTs.
Coordinate various stakeholders in gathering data and identifying issues.
Share information on running and upcoming programmes with various stakeholders.
Share information on the current socio-economic and political situation in the country
and advise IFDF on how best to work within such a socio-economic and political
environment.
The members of the Coordination Committee will be appointed from various stakeholders:
NGOs, INGOs, consultants, various operators, contractors working in the sector, users and
interest groups, as well as from relevant bodies of government. An IFDF representative will
chair the meetings. Other persons can be invited to the meetings of Coordination Committee,
including the press.
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Executive Director of IFDF
The Board shall appoint the Executive Director. The Executive Director shall be remunerated
at the level of the private sector and INGOs.
Fixed term staff
The Board shall appoint professional fixed term staff. The Executive Director shall appoint
supporting staff and temporary staff. Fixed term staff shall be remunerated at the level of the
private sector and INGOs.
External consultants and outsourcing
The Board may decide on use of external consultants as required. External consultant contracts
exceeding NRs 100,000 shall be based on competitive public tendering. Contracts on lower
amounts may be granted directly.
7.4 Description of bidding documents for the pilot project
In this section, very briefly, the salient points of these documents required for the
implementation of the pilot project are given.
7.4.1 MoUs
There are three types of MoUs as described earlier; each is described briefly below.
MoU between NTA and Rural Urban Partnership Programme (RUPP)
RUPP is an HMG(MLD)/UNDP project. The partnership of NTA with RUPP in the

implementation of cybercafs in DHQs and telecentres in the RMCs was identified as of great
value to the pilot project in previous reports. The MoU (Annex-3 in the Design of Bidding
Process) defines the responsibility of each party as follows:
RUPPs responsibility
o Preliminary work of social mobilisation of communities
o Creation of user committees
o Installation of equipment
o Supervision and monitoring of the telecentres for two years, which could thereafter
be passed on to municipalities
o Liaison between user committee and pilot project (NTA) for activities related to the
pilot project
o Selection of trainees for telecentre operation with user committees
o Provision of training in telecentre operation and info-mobilisation
o Selection of cybercaf entrepreneurs in DHQ in cooperation with Tole/Lane
organisation
o Help entrepreneurs obtain loans from community fund if necessary.
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Pilot projects (NTA) responsibility

o Provide fund for purchase of equipment required for telecentres to respective
communities (user committees)
o Provide training expenses for all training required to operator-cum-manager and
personnel of telecentres and cybercafs
o Obtain monitoring and supervision information through RUPP to oversee that the
project is meeting intended objectives and provide any help that may be necessary.
Tripartite MoU among NTA, International NGOs and National NGO
The pilot project takes advantage of the use of refurbished (used) computers to cover a large
number of schools with a nominal amount of expenditure. As the size of the project is
substantial, the pilot project is to be run in cooperation with experienced NGOs. The initial
provision of computers is proposed in schools where schools are willing to contribute towards
other expenses of the project. The project will be implemented in schools where electricity is
available. This particular MoU (Annex-4 in the Design of Bidding Process) is required for
implementation of the Computers and Internet for Schools Project. The responsibility of each
party is given below:
International NGOs responsibility

It is possible that two International NGOs may be involved in providing free computers.
o To collect Pentium III and above level of used computers free of charge.
o To charge a nominal fee for management of refurbishing, packing and shipping,
which will be paid in advance by the pilot project.
o To ship equipment for use in schools as per objectives of the project and agreed
time schedule.
National NGOs responsibility

A National NGO, selected by the pilot project, will manage the entire project; its
responsibility will be the following:
o To inform higher secondary schools of the project district about the project and
responsibility of the schools in terms of their contribution in the project as well as
their commitment to meeting the project objectives.
o To collect applications from interested higher secondary schools from the project
districts with recommendation of the District Education Office.
o To establish relations with local NGOs or private entrepreneurs for implementation
of the project in line with the purpose of the project being to develop local
capability to implement ICT projects.
o To liaise with the International NGO for scheduling shipment.
o To manage the shipment, equipment storage and transport to the sites.
o To complement the equipment with local purchase to build a network, proper
provision of power supplies, etc.
o To manage installation of equipment.
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o To manage training of teachers as intended in the project.

o To establish a channel for reporting after the project is completed.
o To obtain certified documents from the schools after successful commissioning of
equipment and completion of training of teachers.
o To obtain monitoring information from the schools about use and application of
equipment annually for two years following the installation.
o To provide quarterly progress reports of the project to NTA.
o To provide annual monitoring and supervision information to NTA.
o To ensure that all operations of the project are transparent.
Responsibility of the pilot project (NTA)

o Refurbishing, packing and shipping cost of the used computers is to be provided by
the pilot project (NTA), prior to shipping of equipment, to the International NGO.
o NTA will provide the cost of Internet connection for one year to each school under
the pilot project.
o NTA will monitor through the National NGO that the project is being managed
transparently.
MoU between NTA and nPIX (ISPAN)
This MoU (Annex-5 in the Design of Bidding Process) will contain the following salient
points:
Responsibility of nPIX (ISPAN)

o nPIX (ISPAN) will use bidding documents acceptable to NTA and the World Bank
(these could be NCB documents to be used in the application for IDA credit for the
purchase of the equipment).
o nPIX (ISPAN) will procure the installation services, in a transparent manner, for
installing equipment.
o nPIX (ISPAN) will also procure training services, in a transparent manner, for
training of small ISPs to build up their knowledge in peering.
o NTA will submit monthly progress reports to NTA after signing of the MoU.
o nPIX (ISPAN) will provide copies of commissioning certificates and completion
reports of all the facilities, training and other services procured for the completion
of the project.
Responsibility of NTA
o NTA will disburse payments in amounts due as per contract between nPIX (ISPAN)
and the suppliers for equipment and services on the basis of a request letter from
nPIX (ISPAN).
o NTA will monitor progress of the project on a monthly basis.
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7.4.2 Bidding document for procurement of telecentre equipment
Documents required depend on the method of implementation adopted by the pilot project.
The NCB document as used for procurement of goods within the country using the
proceeds of IDA credit is to be used. In this method, bids will be invited from the
supplier within the country; however, any eligible bidder willing to bid from outside the
country can also participate. This document has been obtained from the MOIC used in
the TSRP project. It has been modified with appropriate data for application in the pilot
project as necessary (Changes required in NCB Document is included as Annex-9 in
the Design of Bidding Process).
Procurement by the user committees
o User committees will be provided with specification (minimum requirement of the

equipment) of the equipment by the pilot project; refer to Annex-6 in the Design of
Bidding Process.
o User committees themselves will buy the equipment on the basis of quotations.
o The pilot project will disburse the amount as demanded by the user committees.
o The amount provided will be controlled by the estimate prepared by the pilot
project.
7.4.3 Bidding documents for the procurement of the training services
For training services simple quotation can be invited from local suppliers. Therefore, only
specification for the training services has been included.
Specification of the telecentre operator-cum-managers training (Annex-7)

At the time of preparation of pilot project design, the cost estimate of the training was
prepared on the basis that the telecentre manager-cum-operators will have some basic
knowledge of how to use a computer. Therefore, the training is designed on the basis of
this entry level assumption. After the training the operator will be able to function as
manager-cum-operator of a telecentre and will also be able to carry out first line
maintenance of the computer and peripherals. It contains training on the following:
o Telecentre management and operations
o Infomobilisation
o Basic hardware maintenance
o Basic software installation, preparation of backups
o Email and Internet application
o Peripherals and their use.
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Specification of the training for cybercaf personnel

This training has common elements with telecentre operator-cum-managers training with
one additional unit. The common components are listed below:
o Basic hardware maintenance
o Basic software installation, preparation of backups
o Email and Internet application
o Peripherals and their use.
The additional component will be:
o Hands-on practice on hardware/software maintenance and diagnosis.
7.4.4 Selection of National NGO to manage Computers and Internet for Schools
Project
The Request for Proposal Document (RFPD) for selecting an appropriate National NGO,
which is included as Annex-8 in the Design of Bidding Process, contains the following salient
points:
Summary of the project
Criteria on which NGO will be assessed
Responsibility of the selected NGO
Information sought from NGO to adjudge its capability and determine its qualification.
An NGO can be assessed based on the following criteria:
Basic qualification
Legally incorporated according to the prevailing laws of Nepal
Managerial capacity to implement the project
Experience in social mobilisation and promoting peoples participation in development
activities
Past experience in handling administrative requirements related with the project
Past experience in working with national and international organisations.
Additional qualification
The following experience will be advantageous:
Affiliation with other NGOs and entrepreneurs involved in the promotion of
educational standards in rural schools particularly related to computer and IT education
Previous working relation with an International NGO that provides free computers
Technical staff software and hardware
Experience in bringing computer and Internet education to rural schools in Nepal.
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7.4.5 Training (consensus building and transfer of skills)
In this connection three workshops were held:

An Expert Group workshop was held, to which were invited a number of experts in the
country working in ICT and information service delivery organisations, including
representatives from MOIC. Strategies for increasing access to rural and peri-urban
areas of Nepal were developed and discussed.
A first in-country workshop was held to finalise the strategies and the summary of
findings.
A final workshop of stakeholders was held towards the end of the project to present the
findings and outputs of the assignment.
Throughout the assignment, presentations on each deliverable and some new ideas on
strategies and principles adopted in studies were made to the working group and discussed
before finalising the reports.
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8 Phase III Support to HMG in conducting the pilot

project
The ICT projects to be implemented generally belonged to the group which come under
community ownership, with community mobilisation being a vital element. All the projects
were designed in such a way that NTA has at least one partner helping in its implementation.
This was done to ease the burden on NTA staff of implementing projects with which they are
not familiar. So during the design of the project, a great deal of effort was put into identifying
competent, experienced partners who are motivated by the common objectives of the project
and discussing with them as to how they could participate. The MoUs developed between NTA
and partners will help in implementing all these projects, thus not only soon eliminating the
need for consultant help but also giving sufficient time to the NTA staff to begin to understand
the nature of these community owned projects and learn to manage them for the future.
In addition, the consultants are willing to assist NTA in pilot project implementation for one
month beyond contract period as long as NTA is ready to receive such assistance.
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9 Final Workshop
A Half day final workshop with the following objectives was organised on 5th of January. It
was well attended by participants.
9.1 The objective of the Workshop
The objectives of the workshop were following:
To present the findings and out come of the study

To outline the contents of the draft final report
To present the activities of the partners of pilot project
To obtain comments and suggestion of the stakeholders that could be incorporated in
the final report
The consultants made presentations on almost the entire project. Proposed pilot project
partners like RUPP, COPPADES (likely partner), and nPIX also made presentations. The
detailed report on workshop proceedings has been separately submitted. The following are
the conclusions and recommendation of the final workshop
9.2 Conclusions and recommendations

The workshop was able to inform the stake holders about the entire study and its
findings and outcome.
On the questions of sustainability of ICT projects like telecentres raised by some
participants, Consultants reminded the participants that sustainability was the basis of
the strategy proposed in the study. Basing on the sustainability consideration, the
number of telecentres proposed in the study is far less than what was proposed in the
tenth plan. It is recommended that while implementing ICTs, full consideration on
strategies outlined in the report be considered by authorities so that sustainability
issues are addressed adequately.
HLCIT seems to still have question regarding having one more agency like IFDF and
its role in the face of several agencies (as expressed by them) already involved in
managing ICTs in the government. HLCIT thought that they were not consulted while
working in such an important area. It is recommended that while finalising the
establishment of proposed IFDF, MOIC, MOSTE and HLCIT work closely.
There was strong opinion about need of awareness building for ICTs in rural area. The
study has stated that provision of ICTs in rural areas in community should be demand
driven. The situation of demand driven can only be reached by building awareness of
the people for ICTs, which is one of principles on which rural ICT development is
proposed in the study. It is recommended that awareness building by using
Infomobilisation techniques and other means should be followed to create real need for
ICTs in rural areas.
It is further recommended that gender aspects must be fully taken care of at the local
level.
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10 Recommendations
In this section we would like to summarise recommendations which are based on our findings
from the sector overview, workshops, discussion and interviews with people engaged in
development of ICTs and other rural development activities. The latter includes the Alternate
Energy Promotion Centre and the experience of consultants working in different areas.
10.1 Policy and regulatory Items
Either HMG should amend the Telecom Act 1997 or NTA should change the current
regulation in order to implement the main part of the new telecom policy immediately
so as to liberalise the telecom sector.
HMG should delegate the responsibility of management of frequency to NTA (for the
licensee of NTA).
HMG should nominate NTA as the authority to coordinate the import function of the
wireless equipment (for NTAs licensees) directly with the custom authority.
MOIC should make WiFi Bands in 2.4 and 5 MHz license free to facilitate rapid
growth in wireless networks. These frequencies are license free in most countries.
NTA should waive the licence fee and royalty for providing Internet service in the less
developed regions of the country by delineating such areas.
HMG should decrease the royalty for Internet service providers and community radios.
NTA should issue directives to telecom service providers to make dial-up Internet
access available within a region at local rate.
NTA should commence regulation of leased circuit prices and quality, as a single
operator, i.e. the incumbent operator is the main provider of leased circuits.
MOIC should make radio broadcasting licensing more transparent.
10.2 Rural telecom infrastructure for telephones

HMG and NTA should promote provision of optical fibres over the power grid and
their lease to operators or users without any license fee and royalty for such backbone
providers.
NTA must encourage Nepal Telecom to attain radio coverage of 95 per cent of the
population of the country through its CDMA network, which will minimise the
requirement for creating further coverage with subsidy. NT has this responsibility as it
has enjoyed a monopoly in the lucrative international telephone service for a long time
and its obligation to develop rural communication sufficiently still remains to be
fulfilled.
NTA should start working closely with NT in providing CDMA network for the rural
coverage and determine the gap that is required to be covered by RTDF.
NTA should start implementing trial projects through licenses for telecom network and
services using Internet Protocol.
NTA should commence providing PCO with subsidy for settlements greater than 500,
if within a year no commercial operation starts after radio coverage by CDMA.
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10.3 Internet access
NTA must see that public Internet dial-up access is made available to all districts of the
country at local rate, without any discrimination between them, to promote growth and
use of the Internet.
NTA must implement local dial-up for Internet within a region to provide choice of
ISPs to customers.
NTA must assist nPIX (ISPAN) in setting up regional Internet exchanges.
NTA with DDC and municipalities should commence identifying rural market centres
for staged provision of public Internet access (26 per district).
HMG should provide computers to secondary schools or higher, for students to learn to
use them, wherever there is electricity supply and local competence and interest in
promoting the use of Internet and information services.
HMG should devise and implement further programmes for computers and Internet to
schools.
10.4 Community radio stations
HMG should support establishment of community radios, at approximately 5 per year,

to cover 90% of the rural population.
10.5 New governing body for ICT implementation
NTA should establish the proposed RTDF Management Committee for managing
activities under RTDF for telecom facility development in rural areas where
commercial telecom services are not possible.
HMG should establish a proper governing body for managing implementation of ICTs
along the lines of AEPC or PAF other than telecom facilities in rural areas under the
proposed ICT Facility Development Fund.
MOIC, MOSTE and HLCIT should work closely while finalising the establishment of
proposed IFDF.
10.6 Central level actions for development of ICTs
Hasten the adoption of ICTs in central government, for example encouraging email
communications between civil servants, and also with ordinary citizens.
Commence producing useful attractive and accessible development content (in local
language and minimising literacy requirement).
Provide good data connections among Nepalese universities, linking them to external
academic and research networks (for example, through the Asia-Pacific Advanced
Network9 group).
9
See http://www.apan.net
Main Report
Increase awareness of ICTs; include topics related to ICTs in capacity building

programmes for DDCs, VDCs and municipal officials.
Include ICTs in participatory development programmes of DDCs, VDCs, and
municipalities to increase access to ICTs in rural areas.
Implement E-governance to help citizens (both rural and urban).
Main Report
Final Report on Assignment - Study on Increasing ICT Access in Rural and Peri-urban Areas of Nepal (PS-4) A-1
Annex-1: Terms of Reference

HIS MAJESTYS GOVERNMENT OF NEPAL (HMG)
Ministry of Information and Communications (MOIC)
Telecommunications Sector Reform Project (TSRP)
Terms of Reference (TOR)
For
Proposed Study on Increasing ICT Access in Rural and Peri-urban Areas of Nepal
A. Outline of Government Policy and Objectives
His Majestys Government of Nepal (HMG) is already implementing its reform program for the
telecommunications sector. Having recognized, the importance of telecommunications as an
increasingly important factor for economic development, social inclusion and welfare enhancement of
the nation; HMG has taken a number of important actions to improve sector performance. These
include:
1. Parliament passed new Telecommunications Act in April 1997 (amended in January, 2001)
establishing a modern framework for regulation of the sector. The regulatory framework is
aimed at putting all operators on an equal competitive footing and increasing competition;
2. Establishment of Nepal Telecommunications Authority (NTA) as stipulated in the Act and

appointment of the NTA Chairman and it's Members;
3. Adoption of the new progressive telecommunications policy in September 1999 (amended in

August 2002). The stated policy objective is the liberalization of the sector by promoting
private sector participation in all market segments to ensure provision of qualitative
telecommunications services at competitive rates. Recently, a new Telecom Policy is approved
by the HMG. With the successful implementation of the policy, the sector performance is
expected to improve dramatically by allowing open competition. Following are the main
features of the new Policy:-
Telecom Sector will be completely open by 2004 as envisioned by Telecom Policy -1999
An open license system in telecom sector to create healthy competition in the field ending
the government licensing regime. A license will be awarded in a transparent manner
Technology neutral licensing regime
Private sector will be encouraged to invest in the sector. Up to 80 % foreign investment
will be allowed.
License fees will be charged to cover only the administrative expense and overhead of the
regulating agency.
Focus on Universal service obligation for the Service Provider in urban area and universal
access in rural area
Initiative towards the Information Society by expansion of Telecom Service & provision of
Cyber Law.
NTC will be commercialized by converting it in to a company and reduction of HMG/N
ownership
Following provisions are provided to promote rural telecom services:
Annex 1: Terms of Reference

Use of Rural Telecom Development Fund

Reduction of custom tariff from existing 5 % to 1% for import of equipment
Concession of license fees, annual tariff for small service providers for annual
income of less than Rs. 2 million
Promotion of ICT use in support of rural development and Poverty Alleviation
4. More liberal and progressive "New Long-term Communications Policy-2059" has already come
into effect since June 2002.
5. HMG-N has issued licenses to the private sector to operate FM radio, cable, and terrestrial as
well as satellite TV broadcasting services.
The Ministry of Information and Communications (MOIC) is charged with formulating His Majestys
Government (HMG) of Nepals telecommunications sector policy. The 1999 National
Telecommunications Policy aims to develop and expand telecommunications services in a fair
competitive atmosphere with the involvement of private sector and to make available new
telecommunications services needed for the development of the country, by fulfilling the demand for
services in a timely manner in all the areas of the Kingdom. Specifically, the policy provides for the:
1. Involvement of the private sector in the development and operation of telecommunications

services in accordance with liberalization policy of HMG of Nepal.
2. Provision of quality services at a reasonable price by creating an environment of fair

competition among the service providers.
3. Provision of basic telephone services in remote and inaccessible rural areas also of the
Kingdom.
4. Creation of a pro-competitive interconnection regime.
Progress has been made in the implementation of the policy as evidenced by the following key actions
taken by the Government and NTA:
Issuance of a total of over 110 licenses for VSAT, radio paging and internet service providers;
Basic telephone services and cellular mobile service;
Selection process of a second GSM operator started in November 2000;
Decision to privatize Nepal Telecommunications Corporation (NTC) and completion of a draft
information memorandum (with the assistance of DANIDA financed consultants). The
privatization process is expected to be completed within the next two years. As a precursor to
privatization, NTC has already been converted to a Limited Company which will be effective
from April 13, 2004.
Selection of a WLL operator in June 2001.
Rural access and connectivity are the priorities of HMG. As a part of strategy of HMG, reflected in the
recent telecommunications policy, MOIC and NTA are establishing a benchmark subsidy for rural
investments by private operators. Process to issue a license to a private operator for the provision of
Rural Telecommunications Services (RTS) in the Eastern Development Region has already been
started. The bidder proposing the best option indicating lowest subsidy has been selected through
international competitive bidding. This will ensure efficient utilization of scarce public resources and
will provide a benchmark for rural operations of NTC.

The primary activities included in the reform program are the following:
Preparation of a policy update and strengthening the organizational and institutional capacity of
the policy cell to enable it to respond to policy issues in the sector
Modernization of the radio spectrum management and monitoring system and regulatory
regime, including strengthening institutional capacity
Establish an adequate regulatory environment by strengthening the capacity of government to
respond to regulatory issues in the sector.
Prepare licensing strategy to provide telecommunication services in the rural areas
Finance the subsidy element required to induce private operators to provide rural
telecommunication services (RTS)
Avoid unfair competition among the service providers.
Programs and Institutions Related to Rural ICT Public Centres
There are many stakeholders who are initiating work in rural ICT Public centres. They are Ministry of
Science & Technology, MOST (UNDP assisted), National IT Coordination Committee (NITC), Rural-
Urban Public Partnership Programme, and Ministry for Local Development (MOLD) and proposed
JICA Assistance in Mutli-Purpose Community Tele centre (MCT). UNDP is undertaking (started from
May 1, 2003) a study "Assessing the Feasibility of ICT as a Development Instrument for Rural-Urban
Linkages in Nepal". The MOLD is preparing an IT Master Plan for Local Governance. The interest of
the MOLD in ICT is to promote ICT in District Development Committee (DDC) and municipalities and
to host the web pages of these institutions. Further, JICA is interested to provide JPY 100 Million as a
grant aid to HMG/N for establishment of MCT model in eight Village Development Committees
(VDCs) in four districts in the vicinity of Kathmandu. The main objective of this proposed Japanese
project is establishment of 10 MCTs.
Public ICT Access Centres in Rural Areas
HMG/N has an ambitious plan to set up 1500 IT access centres by the end of the 10th plan period. the
MOIC and MOST are collaborating through the national IT coordination committee and other working
level committees to develop a strategy to implement the plan. The UNDP is providing MOST with
limited support to pilot fifteen rural telemeters in order to (i) design, test and specify a replicable
methodology for eliciting and delivering the information needs of rural communities. MOIC intends to
commission a study to develop a toolkit for scaling out the provision of rural public ICT centres. This
would include (i) estimating potential demand, likely take up, user revenue, and ICT potential; (ii)
developing funding principles and processes for such centres; (iii) developing business plans for the
provision of services; and (iv) developing a monitoring and evaluation process. This proposed study
would complement the work being carried out under UNDP funding.
B. Scope of Work for the Proposed Study on Increasing ICT Access in Rural and Peri-
Urban Areas of Nepal
Objective
a) To develop of an understanding of the characteristics of the rural/peri-urban and low income

ICT market so as to be able to determine the appropriate methods of meeting this demand,
including the appropriate institutional arrangements.
b) To determine the cost of providing ICT access to rural/peri-urban and low income users
(groups) and what proportion of the cost should be borne by these users and what proportion
should be subsidized by the Rural Telecom Development Fund (RTDF).

c) To determine the cost of expanding (and to encourage the private ISPs to expand their
services in the rural areas too) internet points of presence in all districts in Nepal;
d) To recommend the institutional and regulatory requirements for the operation of the RTDF.
e) To set out the mechanism as to how private sector can participate in the delivery of ICT
services for rural and low income users and the regulatory requirements to monitor such
service providers and recommend a detailed strategy to improve access to ICTs in rural/peri-
urban and other under-served areas.
f) To develop appropriate business models for the sustainable delivery of ICT access to rural/
peri- urban and low income users through public-private partnerships;
g) To design and support HMG in conducting a pilot project for public access to ICTs.
Overall structure of the assignment
The assignment will be divided into three (3) phases:
Phase I: The consultant will analyze the existing level of provision of these services, what potential
demand exists for them, and what constraints exist to their development (technical, economic, and
regulatory). The consultant will propose viable alternatives to meet this demand, with a detailed
analysis of the costs involved as well as the regulatory implications, and the role of the RTDF.
Based on this analysis, the consultant will develop practical strategic options and operational
schemes for the provision of the necessary infrastructure and services, such as Internet Points of
Presence, telecentres, and Internet access for schools.
Phase II: The consultant shall conduct a demand study and develop a detailed pilot project to be
funded by the RTDF (managed by NTA) to demonstrate the viability of the proposed strategy. The
consultant shall prepare the bidding documents for the pilot project (for Internet POPs and
Telecentres), which can be considered as an experimental bidding round from the RTDF.
Phase III: Support the HMG in conducting the competitive bidding process under the pilot project
designed in phase II, and negotiations with the winning bidders.
Task I Phase One
a) Sector Overview and Review of International Experience. During this initial task the
consultant will briefly describe the overall rural environment, existing level of service
provided in rural/peri-urban areas, the role of industry players and government institutions, the
business and regulatory environment in which these services are delivered, as well as
consumer expectations. Information for describing the existing telecommunications and IT
sector is expected to be available from existing sources, without conducting primary research,
except for short field visits (not to exceed about 12 days) to selected locations identified in
conjunction with MOIC, NTA and MOST. Specifically, the review will consider:
Overall rural environment, including population density and distribution, income levels
and distribution, nature of economic activities and principal sources of income, degree of
cultural and linguistic homogeneity, terrain, availability of basic infrastructure, in
particular electricity and postal services, as well as major potential users of ICT services,
such as local governments, post offices, health centres, schools, and large business
customers;
Present and expected future evolution of the legal, policy and regulatory framework within
the ICT sector, with particular focus on its impact on the development of rural
telecommunications, broadcasting and the Internet;

Current sector structure, range and reach of services provided, marketing and investment
strategies of sector players, and potential existence of alternative service providers (e.g.
power companies);
Current status of the telecommunications network, from the perspective of the suitability of
both the national backbone and access networks for provision of telephony and Internet
services to currently under-served areas, both rural and urban. This would involve a
technical survey of the network to identify potential bottlenecks to the provision of
advanced services to rural and peri-urban communities;
Governments objectives and policies for the development of rural areas, including the
status of other planned rural development initiatives such as posts, electrification, roads,
and water;
The consultant will advise the Government on recent experience in rural
telecommunications and ICT sector in other countries, with particular emphasis on
experience which may be relevant in the Nepalese context.
b) Recommended Strategy and Operational Parameters. Based on relevant international

experience, the results of the initial field visit and existing demographic and socio-economic
information, the consultants will propose viable strategic options for consideration by the
government on how to increase availability of basic telephony and information services, such
as Telecentres and Internet for schools, to rural and under-served urban areas. The general
objective is that service provision in rural and under-served areas be commercially viable over
the long term. To the extent that private investment is considered unlikely to serve all areas,
the consultants shall develop a range of scenarios for targeted interventions that could
potentially be financed through the RTDF. Each option will address:
its impact on meeting service targets over time
its impact on the evolution of the sector structure
commercial viability and sustainability.
compliance with existing policy, regulatory, legal, and technical framework, or with
specific suggestions for achievable adjustments to the framework.
regulatory implications, in particular on licensing, interconnection and tariffs
private participation.
extent of local community participation
overall cost and possible sources of financing.
relationship between local service providers and long distance carrier or carriers.
technical capacity to implement the option.
The options are not required to be developed in extensive detail, but rather to that level which will
allow the government to identify preferred options for further elaboration and implementation.
Preferred funding sources will be the private sector, but public funding sources may also include
government, donors, RTDF or new financing mechanisms. If any of these sources are suggested, a
brief description of the policies and operations of the funding source shall be included. The
consultant shall explore options to structure any such intervention in the most appropriate way so as
to leverage the maximum amount of private investment and optimize impact in providing rural
service.
c) Recommendation and consensus building. The Consultants shall organize a workshop to

discuss the proposed strategies with stakeholders and secure consensus on the preferred
strategy. After the workshop, the consultants will finalize the strategy in consultation with the
Government, taking into account stakeholders response. The strategy will include a detailed
action program for its implementation together with an estimate of the resources required.

Task II Phase Two
a) Design of the Pilot Project. The government wishes to conduct a pilot project as a first step in
implementing the recommendations of the consultants. The consultants will support in the
evaluation of the appropriate zoning of the country, evaluate the objective level of service in
each region with a cost/benefit approach (according to the penetration goals established), and
prioritize the projects, selecting the most promising areas to be served under the pilot project,
bearing in mind the available budget.
The consultant will specifically analyze the possibility of expanding Internet Points of Presence in
Nepal, installing a small number of commercially viable telecentres in select locations to be
expanded subsequently on a commercial basis into a national network of telecentres and public
Internet access points.
At the end of this task, the consultant is expected to prepare a methodology, terms of reference,
sample survey and select a number of locations, in agreement with MOIC and NTA. These selected
locations will represent samples of the target areas for the pilot project, in which a demand study
will be, conducted subsequently, which the consultants may conduct directly or may contract out to
a local company.
b) Demand Study: The demand study will be based on a thorough survey of selected locations,
as described below, which will produce a detailed description of expectations for services in
the rural and under served urban areas, the potential demand for new services, and technical,
legal and business constraints for the delivery of additional services. The potential level of
telecommunication and information services utilization in Nepal should be described in detail
based on a demand study including three different scenarios (urban, semi-urban and rural).
Each scenario should include at least three surveys of the most populated areas within each
scenario, according to the National Census. Utilization estimates will include a prioritization
of telecommunication needs, such as:
Priority customers, such as administrative centres, hospitals, police stations, post offices,
Internet service providers, schools, businesses, etc.;
Appropriate extension and connections to the national backbone network;
Analysis of the users payment ability and the types of demanded services;
Required service levels and transmission capacity for towns and villages in different sizes,
segments, and/or at different levels in the administrative hierarchy, based on estimates of
demand for different services, from voice to Internet access;
Appropriate policy targets for the desired service levels, such as minimum acceptable
distances (in km or hours of walking) from the nearest public communication point,
numbers and sizes of villages/towns for which it is achievable to have at least one
payphone and/or one telecentre within a specified number of years, as well as estimated
cost of this deployment.
c) Design of Bidding Process for the Pilot Project. The Consultant shall assist in the development
of the regulatory structure of the RTDF, its organization and procedures. The consultant will
design the bidding process and documents involved, coordinating closely with the consultants
retained for the development of the legal and regulatory framework if new legislation is
required and new licenses and interconnection agreements need to be developed. The
consultants shall develop a Fund Operation Manual, taking special attention to building
environmental guidelines into the process and drawing from existing experience and similar
documents used in other countries. The consultant will also establish the organizational
structure of the Fund, covering staffing and assess the facilities and equipment needed.

Task III Training

Task 3. Consensus building and Transfer of skills
a) Conduct an in-country workshop to present the findings and outputs of the assignment, as
an essential step in securing the necessary consensus to ease approval of the policies
developed with all stakeholders in the sector.
b) Throughout the assignment, the consultants will provide hands on training to MOIC staff in
ICT an effort to transfer skills to their counterparts.
Task IV Phase Three
Implementation of the Pilot Project. The consultant will assist NTA in conducting the competitive
bidding process designed above. The Consultant must support NTA in the evaluation of the offers
and preparation of the recommendations to award the licenses and the subsidy (if required). The
Consultant will assist NTA in the negotiations of the license and the process of providing the
subsidy.
C. Administrative Arrangements
Counterpart
The Consultants shall report to the Project Coordinator, TSRP/MOIC. The assigned counterpart will:
facilitate coordination with other consultants and relevant Government departments.
facilitate access to reports, information, and data and to other persons in HMG as appropriate
and in a timely manner.
provide office space, local administrative support and facilities.
The consultants will work closely with the working group in HMGN comprising of officials from
MOIC, NTA, MOST and MOLD. While developing the RTDF operational manual, the consultants
will work closely with NTA.
Time Frame
The entire assignment is scheduled to be completed in 10 man-months over a period of 12 months.
Phases One and Two of this consultancy are scheduled to be completed within 8 man months in an 8
months period from the date of signing the agreement between the MOIC and the Consultant
Phase Three of this consultancy is scheduled to be completed within 2 man months in a 4 months from
the date when the notice is published announcing the beginning of the bidding process for the pilot
project
D. Qualifications
Competency and Expertise

The Consultant is expected to provide all the expertise to complete the assignment. The Consultant is
expected to have had previous practical experience in carrying out rural telecommunications and ICT
studies and must be familiar with the developments relating to the private provision of
telecommunications services to rural and low income users. The team is expected to include
telecommunications engineer, information technology experts, legal expertise in telecommunication
law, telecommunication and ICT economists, financial and accounting expert and institutional
specialists.

The Specific Skills Requirements

Practical experience and knowledge of telecommunications and information technology as well
as legal, regulatory and economic and technical knowledge.
Practical experience in carrying out studies in the delivery of telecommunication and ICT
services by private operators to rural and low income users in a developing country
environment.
Previous practical experience in establishing subsidy fund for financing rural utility services.
The Consultant is encouraged to include local professionals or firms as part of the consulting team in
carrying out this assignment. The contract will be with the Lead Consultant where a consortium is to
provide the services.
E. Deliverables
The consultant should produce the following reports and recommendations with the following timing of
the deliverables. The Consultant shall submit monthly reports on the progress of the assignment, and a
full report upon completion
Timing Deliverable
Commencement Date + 1 week Inception Report, 6 copies (updating the methodology)

Report on Sector Overview and Review of International
Commencement Date + 4 weeks
Experience, 6 copies
Commencement Date + 3 months Final Strategy Report and a separate note on the workshop
Commencement Date + 5 months Report on the Design of the Pilot Project, 6 copies
Commencement Date + 6 months Report on the Demand Study, 6 copies

Report on the Bidding Process, including draft bidding
Commencement Date + 8 months
documents and regulations for the Pilot Project , 6 copies
Commencement Date + 11months Draft Final Report for the assignment , 6 copies
Commencement Date + 12months Final Report for the assignment , 10 copies
Monthly Progress Report 5 copies
1. Phase Three of this consultancy is scheduled to be completed within 4 months from the date
when the notice is published announcing the beginning of the bidding process for the pilot
project. At the end of this process, the consultants are expected to prepare a report on the
competitive bidding process, and in addition giving a full retrospective of the whole
assignment.
2. The Consultant will provide hard copies and an electronic copy of each deliverable to the
Government (MOIC and NTA). One copy of each deliverable will be provided to the World
Bank in hard copy and electronic format. Successive versions of reports, draft regulations and
tender documents will be submitted electronically and marked to show changes from the
previous draft. The required numbers of final tender documents will be submitted in hard
copies.
The final drafts shall be the result of a continuous dialogue with MOIC and NTA, and all sector
stakeholders in general (including the World Bank). In this process, and at the request of the MOIC, the
Consultant shall draft consultation papers on specific universal access matters as deemed appropriate.

Annex-2: Members of the ICT Working Group and

Consultants
The contract for this study was signed on 13th September 2004 between the Ministry of
Information and Communications and the Consulting group led by the Organisation
Development Centre (ODC). The consulting group consisted of the following:
1. Mr. Mohan Das Manandhar Organisation Development Centre (ODC)

2. Mr. Manaswee Raj Vaidya Organisation Development Centre (ODC)
3. Mr. Suresh Kumar Regmi Professional Computer System (P) Ltd
(PCS)
4. Ms. Claire Barbara Milne, Co-team Leader Antelope Consulting
5. Mr. Arno Wirzenius Teleplanning A. Wirzenius Ltd.
6. Mr. Satish Krishna Kharel
7. Mr. Manohar Kumar Bhattarai
8. Mr. Roger Harris
9. Mr. Gajendra Singh Bora, Co-team Leader
The Ministry formed an ICT Working Group consisting of the following officers of the MOIC
and NTA to provide guidance to the Consultants in fulfilling the study objectives and also to
review the deliverables submitted to the Ministry and recommend their acceptance:
1. Mr. Mukund Prasad Acharya, Joint Secretary, MOIC Convenor

2. Mr. Sushil Ghimire, Joint Secretary, MOIC Member
3. Mr. Suresh Kumar Pudasaini, Chairman, NTA Member
4. Mr. Mahesh Prasad Adhikari, Special Officer, MOIC Member
5. Mr. Vishwo Nath Dhakal, Under Secretary (Finance), MOIC Member
6. Mr. Ambar Raj Poudel, Under Secretary (Legal), MOIC Member
7. Mr. Ramesh Kumar Adhikari, Under Secretary, PPME/TSRP, MOIC Member
8. Mr. Shyam Bahadur Basnet, Sr. Executive Engineer, MOIC Member Secretary
During the life of the study there have been changes in the senior positions of the joint
secretaries and special officer ranks in the ICT Working Group. The new members in those
positions are now:
1. Mr. Suresh Man Shrestha, Joint Secretary, MOIC
2. Mr. Ratna Raj Pandey, Joint Secretary, MOIC
3. Mr. Sohan Bahadur Nyachhuon, Special Officer, MOIC
The Consultants express their sincere appreciation to the Chair and members of the ICT
Working group for their valuable suggestions and guidance in the progress and finalisation of
the entire study.
Annex 2: Members of the ICT Working Group and Consultants

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Organisation Development Centre (ODC)

Developing Healthy Organisation Through People

Professional Computer System (P) Ltd (PCS)

Teleplanning A. Wirzenius Ltd.

Ministry of Information &

Volume I: Final Report

Study on Increasing ICT Access in Rural and

January 19, 2006

VOLUME I - FINAL REPORT

EXECUTIVE SUMMARY .....................................................................................................................................1

5.2.1 Categorisation of districts in regions ......................................................................................26

7 PHASE II DESIGN OF BIDDING PROCESS AND RTDF MANUAL..............................................52

Annex-1 Terms of Reference ..................................................................................................A-1

VOLUME II 1st LOT OF STUDY REPORTS ANNEXED TO FINAL REPORT

VOLUME III 2nd LOT OF STUDY REPORTS ANNEXED TO FINAL REPORT

LIST OF OTHER AVAILABLE PROJECT REPORTS

Table 1: Telecom status and demographic features of subdivisions of Nepal .................... 10

Table 18: Increase in email and Internet Customers of NT .................................................. 47

Figure 1 Current NT plans for Phase 1 CDMA deployment.................................................. 12

ADDCN Association of District Development Committees of Nepal

NITC National Information Technology Centre

Most of the work has fallen into two major phases:

We propose ambitious goals for widespread availability of telephone service by 2010

A further highly recommended activity, which cannot be pursued in current circumstances, is

Volume I - Final Report

2 Objectives of the Study and Structure of the

This study had the following objectives:

2.2 Achievement of objectives

2.3 Overall structure of the assignment

This phase consisted of the following activities:

This phase consisted of the following activities:

2.3.3 Training (Consensus building and transfer of skills)

This task consisted of the following:

2.3.4 Phase III

This phase consisted of the following activities:

3 Phase I Background Work for Developing Strategy

3.1 Summary of findings from Sector Overview

TABLE 1: TELECOM STATUS AND DEMOGRAPHIC FEATURES OF SUBDIVISIONS OF NEPAL

C Mountain 555 88 5% 37% 2 1081 1 of 3 0 of 3

W Mountain 25 4 - 100% 6 2702 0 of 2 0 of 2

MW Mountain 310 15 - 15% 1 924 0 of 5 0 of 5

FW Mountain 398 50 0 37 1 687 0 of 3 0 of 3

Eastern 5344 188 12 52 10 1110 14 of 16 8 of 16

Mountains 1690 33 4 38 2 1233 3 of 16 0 of 16

TABLE 2: OPINION OF ADEQUACY OF GOVERNMENT TELEPHONE FACILITIES1

Good % Fair % Bad %

Nepal 14.9 57.1 28.0

FIGURE 1 CURRENT NT PLANS FOR PHASE 1 CDMA DEPLOYMENT

3.2 Summary of findings from Review of International Experience

Examples of e-post implementations in India and Bangladesh for two-way

3.3 High-level findings of other studies

The improved delivery of government services, where services are comparable to

3.4 Lessons from using competition for subsidies in rural telecom

3.4.1 Key factors in a successful approach

Demand factors Supply factors Enabling environment

FIGURE 2 COMPETITION AMONG FIRMS FOR SUBSIDIES: CRITICAL SUCCESS FACTORS

Indicators of the success of a bidding process for subsidies may include:

3.4.2 Experience of other countries

Alternative Energy Promotion Centre: Government subsidy policies