Over-the-top (OTT) platforms have revolutionized digital content consumption globally by providing users with on-demand access to entertainment, communication and other digital services. In Nepal, the regulatory framework for OTT services is still evolving as authorities attempt to balance innovation, consumer protection and oversight. With rising internet penetration, reliance on OTT platforms is set to grow rapidly. In a price-sensitive market like Nepal, affordability and flexible payment options will be key to attracting and retaining users.

While the future is bright, OTT platforms are facing challenges such as competition from global players, the need for sustainable monetization models and the integration of social media to engage younger audiences. To thrive in this competitive landscape, local platforms must focus on niche markets, competitive pricing and high-quality content that resonates with Nepali viewers. However, the current regulatory framework raises many questions about the efficiency and shrewdness of the existing legal provisions. The 11th Amendment to the National Broadcasting Rule, 2021 (Broadcasting Rule), introduced measures to regulate OTT platforms. However, there are ambiguities and gaps in the Broadcasting Rule that necessitate revision.

Distinction between Telecom Services and OTT Platforms

While the legislative intent to define OTT provisions seems to stem from the nature of telecommunication services, the varying functionality of both services calls for a clear distinction between them. The distinction is required over the scope of telecommunication services and OTT, and regulatory authority’s jurisdiction and licensing requirements. 

The debate over whether the Nepal Telecommunication Authority (NTA) should regulate OTT platforms continues to unfold across various jurisdictions. OTT platforms are not entirely independent, as they still rely on telecom infrastructure for their operations. However, under the Broadcasting Rule, these platforms are defined as entities that function without traditional means of communication channels.

The existing laws task the NTA with overseeing OTT platforms, considering their wider scope and ever-expanding and disruptive nature. However, assigning the same authority to both telecommunication services and OTT could invite tussle between the two sectors. For instance, the Telecom Disputes Settlement and Appellate Tribunal (TDSAT) of India recently ruled that OTT platforms do not fall under the Telecom Regulatory Authority of India (TRAI) as per the Telecommunication (Broadcasting and Cable) Services Interconnection (Addressable Systems) Regulations, 2017 (TRAI Regulations 2017). Instead, the tribunal clarified that OTT services are governed by the IT Rules. This decision was issued in response to a petition filed by the All India Digital Cable Federation (AIDCF) against Star India Pvt Ltd (Star), where the tribunal determined that OTT services operate outside TRAI's regulatory purview.

In Nepal, regulatory inconsistencies make effective implementation of the law challenging. For example, the Broadcasting Rule mandates licensing and registration for OTT platforms. But these requirements appear to lack a clear rationale as it is merely a replication of criteria made for traditional communication services. Telecommunication Service Providers (TSPs) operate under stringent regulations, including licensing, spectrum allocation and adherence to strict infrastructure and service standards. In contrast, OTT platforms utilize the public internet to deliver innovative, app-based services that transcend geographical limits and traditional regulatory frameworks. Attempting to regulate both under a single authority overlooks their fundamentally different operational models, technological foundations and user expectations. Such an approach risks stifling innovation and imposing undue regulatory burdens.

A key distinction between TSPs and OTT platforms lies in their functionality and scope of communication. TSPs facilitate cross-network communication, allowing users on different networks to connect easily, whereas OTT platforms restrict interactions to users within the same application. Additionally, OTT services offer advanced features such as group calls, multimedia messaging and unlimited text capabilities which go beyond the basic services provided by traditional telecom operators. These fundamental differences highlight why OTT platforms and TSPs cannot be regulated under the same framework or by the same authority.

The OTT Regulatory Framework (draft) proposed by the NTA categorizes OTT as communication services that include messaging, telephony (voice/video, conferencing) and content services that are audio/video (for example; Netflix, Spotify). The former shares almost the same functionality as the latter in reference to the definition of the ‘Telecommunication Service’ as provided in Section 2(D) of the Telecommunication Act, 1997. The shared functionality between these two calls for a proper categorization of the term ‘Communication Services’ as it has larger implications.

The lack of proper categorization of telecommunication services (electronic) invites ambiguity in the regulation and application of it. Interpersonal Communication, one of three categories of electronic telecommunication services, under the European Electronic Communication Code (EECC) further categorizes it under two folds; a) Number-Based Interpersonal Communication Services (NB-ICS), and (b) Number-Independent Interpersonal Communication Services (NI-ICS). NB-ICS refers to services that utilize publicly assigned numbering resources, such as national or international numbering plans, to facilitate communication. These include traditional voice calls, SMS and MMS. NB-ICS operates without relying on publicly assigned numbers which means they do not connect to national or international numbering plans. The EU classification for defining OTT services states that any OTT platform facilitating direct one-to-one communication through various means should be considered equivalent to traditional telecom service operators (TSPs). This includes voice services (such as VoIP), video calls and text messaging. This very definition is further supported by the European Court of Justice’s (ECJ) ruling on the Skype Out case stating that it falls under telecommunication services.

In Nepal, services such as Skype Out, Google Voice and other number-based interpersonal communication platforms (as defined by the EU), along with ride-hailing apps and gaming applications like PUBG, FreeFire and Clash of Clans, are considered telecommunication services. However, their classification as OTT services remains unclear under the latest amendment to the Broadcasting Rule. Since these services operate within the telecommunications domain, they fall under the regulatory oversight of the NTA.

Net Neutrality

One of the key principles at stake in this debate is net neutrality—the principle that all internet traffic is treated equally, without discrimination or preferential treatment by internet service providers (ISPs). Net neutrality is critical for maintaining a level playing field, enabling startups and smaller OTT platforms to compete with established giants. In Nepal, where the digital economy is still in its early stages, upholding net neutrality is essential to foster innovation and ensure that local OTT platforms can grow without being overshadowed by global players.

From the perspective of telecom operators, the exponential growth of data-heavy OTT services, such as video streaming, places a significant strain on their networks, necessitating additional infrastructure investments. Some argue that OTT platforms should pay for the increased bandwidth that they consume. However, this approach risks undermining net neutrality principles by creating a two-tiered internet where only those who can pay receive faster access.

The NTA has encouraged mutual cooperation between OTT platforms and TSPs to foster socio-economic benefits as outlined in the OTT Regulatory Framework (Draft). However, the subsequent amendment to the Broadcasting Rule failed to incorporate net neutrality provision. Given that net neutrality mandates ISPs to treat all internet traffic equally, without blocking, throttling or prioritizing certain data, its inclusion is necessary to prevent unfair market advantages. Without these safeguards, ISPs could favor specific services and content providers thereby stifling competition and innovation. To address these challenges, regulatory provisions should be carefully drafted to strike a win-win solution, balancing the interests of OTT platforms, ISPs and TSPs.

Intermediary

The NTA’s draft framework on OTT regulation permits foreign OTT providers to register as intermediaries. However, this provision has neither been incorporated into the Broadcasting Rule nor been discussed substantially. The provision mandates intermediaries to register under the Companies Act but lacks clarity on sector-specific regulatory oversight. The ambiguity creates significant uncertainty for foreign investors and OTT platforms considering expansion into Nepal, while also raising questions about the role and responsibilities of intermediaries in the regulatory framework. It remains unclear whether intermediaries should obtain licenses from the NTA or other regulatory bodies. Additionally, there is no specification on reporting obligations related to financial transactions, user data or service operations. Most concerning is the potential for foreign OTT providers to establish mere shell companies in Nepal–entities with no genuine operations or substantial presence–simply to satisfy regulatory requirements. This is because the regulatory framework has not set minimum requirements for capital, physical presence or active business operations. If these issues are not addressed, intermediaries could exploit loopholes to evade responsibilities. Given that OTT platforms have been a go-to medium for users, there is a pressing need for precise provisions to prevent regulatory arbitrage.

Lawmakers face a considerable challenge in this regard as continuous technological innovation constantly redefines the scope and nature of OTT platforms. Regulators have the responsibility of establishing a clear foundation. As the communication landscape shifts from traditional services to OTT platforms, policymakers must strike a careful balance that both enables this transition and safeguards existing services which are still an integral part of the Nepali economy.

(Bajgain is a licensed advocate, currently working in the technology/fintech law domain.)

(This opinion article was originally published in  April 2025  issue of New Business Age Magazine.)