Telecom operators in the country are incurring losses of up to Rs160 million a month in revenue due to the bypassing of international calls through illegal connections via the internet, called VOIP.

The government is taking this seriously since it also affects tax revenue and income from Nepal Telecom. In the last few months alone, police have conducted a dozen raids, made several arrests and recently cracked down on Internet Service Providers (ISPs) for allegedly colluding with call bypass racketeers.

Experts say the call bypass thrives in Nepal because rates for international calls are one of the highest in South Asia, and every family is affected because one-fifth of the country's population lives and works abroad. The technology required to bypass calls is available over the counter and anyone with an internet connection can set up a connection. Illegal operators in Nepal, many of those detained have been foreign nationals, evade the official gateway by using VOIP. And since there is no tax or service charge to be paid in this arrangement, the rates for end users are much cheaper.

"The most effective way to stop call bypass is to reduce long-distance telephone charges and render the call bypass rates non-competitive so the illegal operators go out of business," Binay Bohra chairperson of ISPAN says.

The controversy has pitted the ISPs against the mobile phone operators in the country, Nepal Telecom, Ncell, UTL and others. They say their investment in technology is much higher, and they can't go below a certain rate. And it is the hefty government tax on each call that makes the call rate expensive.

"Telecom operators will go out of business if they are forced to lower rates," explains Pasi Koistinen, CEO of Ncell, "it is not possible to provide the same quality of service and still make profits if the rates are lowered."

Another solution might be to open up VOIP licenses for qualifying ISPs covering at least 25 districts and 13,000 VDC, a move which NTA is already considering. A proposal to this effect has already been accepted by the Ministry of Information and Communication. "VOIP technology is already so widespread that controlling it by denying the service would not be effective anymore," Bohra says.

If this happens, telecom companies would have to compete with ISPs for the market, the only thing being that ISPs can enter the business with much less investment. ISPs may run their services with their existing registrations without having to pay for expensive telecom registrations.

Naturally, this has led to some apprehension on part of telecom operators. "The government needs to understand that ISPs and telecom operators are run in different business models. We are a capital intensive business. It is unfair to put the two in the same league and to make them compete for the same market." Koistinen says.

He suggests measures like establishing direct connection between the operators so as to cut off bypassers and cooperating with the police to track down the suspect subscribers for curbing illegal VOIP services. During the raids, the police had found up to 10,000 SIM cards of telecom operators, promoting calls for a curb on bulk sales to suspect customers. Ncell, for its part, says it is already tightened procedures to buy SIMs, drastically reducing the number of illegally bypassed international calls.

While the government is worried about tax and the telecom operators are worried about revenue, Nepali customers are perfectly happy with whoever provides cheap call rates, even if it is illegal. Experts say that unless this demand is addressed by supply, it will be impossible to stop illegal connections. Indeed, both ISPs and telecom operators say it is impossible to completely stop the racket because it is big business and enjoys political protection.

Says Koistinen: "It is impossible to control 100 percent of illegal calls. However we have been helping the police, re-verifying our customers and have suspended several point of sales in the last few years."

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