Apr 24, Kathmandu - The Nepalese government has initiated strict policy interventions targeting Over-the-Top (OTT) services, aiming to bring the digital communication sector under tighter regulation. While innovation, investment, and competition flourish globally, Nepal appears to be curbing the environment conducive to OTT growth.

Despite the rapid increase in internet-based content consumption worldwide, Nepal has introduced provisions that discourage new enterprises seeking entry into this sector. Through amendments to the Broadcasting Regulations (11th and 12th), the government claims to have clearly defined legal boundaries for OTT, video-on-demand, and online television services. However, the lack of a clear implementation framework has led to market confusion. The attempt to regulate internet-based services alongside traditional broadcasting not only creates ambiguity but also risks unfair competition. Existing cable and television service providers, holding licenses, are positioned to enter the OTT space under the same permits, potentially hindering new startups from entering the market.

One of the most controversial aspects of the regulation is the hefty licensing fee of up to NPR 10 million (approximately USD 75,000) for OTT providers. Stakeholders argue that such high fees could displace small and innovative ventures right at the outset. While fees of NPR 200,000 for video-on-demand and NPR 500,000 for online television are set, experts warn that these charges might effectively shut the door on digital entrepreneurship. Additionally, a licensing fee of NPR 2.5 million and an annual 2% revenue share for digital content distributors further burden the industry financially.

The technical provisions proposed are equally stringent. All OTT providers operating within Nepal are mandated to host cash servers domestically, retain user data and transaction records securely, and provide access to government authorities upon request. While aimed at consumer protection, critics argue these measures could compromise privacy, increase operational costs, and add technical complexity. Though the requirement to resolve consumer complaints within 30 days is seen favorably, overall regulatory frameworks are considered imbalanced.

A major point of contention is the failure to distinguish between traditional television and OTT services. Experts highlight that linear TV broadcasting and internet-based on-demand services are fundamentally different. Applying a uniform licensing and regulation system to both could hinder technological innovation and investment security. Currently, traditional channels are regulated by the Department of Television Broadcasting, while internet-based services fall under the Nepal Telecommunications Authority. The overlapping jurisdictions pose risks of policy conflicts and regulatory ambiguity.

The 12th amendment provides some relief by exempting traditional TV channels from needing separate licenses for OTT content, facilitating their digital transition. However, this provision also creates unequal competitive conditions for new entrants. Mandatory content classification (e.g., for all audiences, 10-18 years, above 18) is seen as a positive step but, overall, the policies are perceived to favor established players and hinder new startups.

In developed digital markets, regulation often involves clear distinctions or structured frameworks that promote innovation without imposing excessive fees or unnecessary barriers. Countries like India, Sri Lanka, and Bangladesh regulate broadcasting and telecommunication sectors separately, easing digital expansion.

There is now renewed debate over establishing a dedicated digital regulatory authority in Nepal. Experts emphasize the need for a clear division of responsibilities across digital services, ICT, data, and online platforms, which would foster policy clarity, investment security, and a competitive environment.

Given the rapid expansion of the digital economy, critics warn that overly restrictive policies could have long-term adverse effects. It is recommended that Nepal avoid linking OTT and traditional broadcasting under a single license, clearly differentiate internet-based from conventional services, develop transparent licensing procedures within the telecommunications sector, and establish a modern, forward-looking digital regulatory framework.

Failing to do so risks stifling innovation, increasing dependence on foreign platforms, and causing domestic startups to exit the market. Stakeholders stress the urgent need for the government to revise current policies to foster a vibrant, competitive digital ecosystem in Nepal.