Nepal's Internet Crippled by $22.5 Million Payment Dispute with India

Nepal is grappling with a severe internet crisis as a $22.5 million payment dispute with Indian companies has resulted in widespread outages, impacting millions of users and 18 internet providers. The disruption started on Thursday night when Indian upstream partners cut connections to Nepali internet providers, demanding payment of outstanding dues.

Why this matters: The internet outage in Nepal highlights the vulnerability of digital infrastructure to geopolitical and economic tensions, underscoring the need for governments and private companies to develop more resilient and cooperative systems. The resolution of this dispute will have far-reaching implications for the future of internet governance and the balance of power between states and corporations.

The dispute centers around approximately 3 billion Nepali rupees ($22.5 million) owed by Nepali broadband providers to Indian vendors. The Nepalese government has declined to authorize the transfer of funds out of the country until the internet providers pay their outstanding taxes, leading to a standoff with the private companies.

Private internet providers contend that their businesses are tax-exempt under the current legal framework. Vinay Bohra, Managing Director of Vianet Communications, said, "The government should facilitate the recommendation of foreign currency. We have repeatedly requested the government to provide recommendations, we even showed the warning letter sent by the Indian company to the Ministry of Communications and the Telecommunication Authority, but the government did not take it seriously." The five-hour outage on Thursday impacted over 10 million subscribers to private internet companies in Nepal, with 18 Nepali internet providers experiencing severely reduced or completely cut bandwidth. Major ISPs such as Worldlink, Subisu, Vianet, and TechMinds have been affected, with Worldlink reporting 70% of its services disrupted.

Suvash Khadka, chief executive of the Internet Service Providers Association of Nepal (ISPAN), warned, "It may happen again. It is not in our hands. Internet is a vital service and the government needs to respond." The association stressed the importance of quickly resolving the issue to avoid further disruptions to Nepal's internet services.

The roots of the dispute trace back to a controversial government decision in 2018 to levy a 13% telecommunication service fee on internet services. ISPs argue that maintenance fees are not directly related to telecommunication services and should be exempt from this tax. The controversy has intensified, with the government withholding foreign exchange until the ISPs pay the Rural Telecommunication Development Fund (RTDF) and royalty for the maintenance fee.

Internet outage continues to disrupt businesses, education, and communication in Nepal, the pressure to find a resolution intensifies. The Ministry of Communication and Information Technology insists that the fees collected in advance from consumers must be paid to the government according to the law. At the same time, ISPs are seeking assurances from the government to facilitate the payment of foreign currency tothe Indian companies.

A hearing on the matter is scheduled for next Monday in the Supreme Court, where the legal aspects of the dispute will be examined. As Nepal confronts this internet crisis, the world is closely watching, recognizing the vital role that reliable internet access plays in the modern global economy. The outcome of this dispute will not only shape Nepal's digital future but also serve as a cautionary tale for other nations grappling with the complex interplay between government regulations, private sector interests, and the ever-growing importance of internet connectivity.

Key Takeaways

• Nepal faces severe internet crisis due to $22.5 million payment dispute with Indian firms.
• 18 internet providers affected, impacting over 10 million subscribers.
• Dispute centers around unpaid taxes and fees owed to Indian vendors.
• Nepali government withholds foreign exchange until ISPs pay outstanding taxes.
• Supreme Court hearing scheduled for next Monday to resolve the dispute.