CHAPTER I

INTRODUCTION

1.1 Background of the Industry

Internet has revolutionized the computer and communications world like nothing
before. Invention of the commonly used gadgets like telephone, radio and computer
set the stage for this exceptional combination and integration of capabilities. Firstly,
Internet is at once a world-wide broadcasting capability, a mechanism for information
circulation, and a medium for collaboration and interaction between individuals and
their computers without regard for geographic location and other barriers. Hence,
internet represents one of the most successful examples of the benefits of sustained
investment and commitment to research and development of information
infrastructure. Internet today is a wide spread information infrastructure and are
inseparable from today’s generation because a single touch or click allows us to
connect with people from one corner to another. The development history of internet
is complex and involves many aspects – technological, organizational, and
community. And its influence reaches not only to the technical fields of computer
communications but throughout society as we move toward increasing use of online
tools to accomplish electronic commerce, information acquisition, and community
operations.
On October 4, 1957, the Soviet Union launched the world’s first man made satellite
into orbit. It was one of the major starting stages of internet ideas but without long
term vision. With years ahead and proper research and brainstorming, Federal
Government of USA formed new agencies, such as the National Aeronautics and
Space Administration (NASA) and the Department of Defense’s Advanced Research
Projects Agency (ARPA), to develop space-age technologies such as rockets, weapons
and computers. In between 1962 and 1965, the ARPanet development added values to
internet. ARPanet was developed with the intention to destroy enemy’s
communication system at one fire. It was a huge improvement for USA not in the

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perspective of war, but in the information technology. Without the concept of internet,
this would never have been possible. In the end of 1969, just four computers were
connected to the ARPAnet, but the network grew steadily during the 1970s. By the
end of the 1970s, a computer scientist named Vinton Cerf had begun to solve various
communication problems by developing a way for all of the computers on all of the
world’s mini-networks to communicate with one another. He called his invention
“Transmission Control Protocol” TCP. Since then, the Internet has changed in many
ways. In 1992, a group of students and researchers at the University of Illinios
developed a sophisticated browser that they called Mosaic. (It later became Netscape.)
Mosaic offered a user-friendly way to search the Web: It allowed users to see words
and pictures on the same page for the first time and to navigate using scrollbars and
clickable links. That same year, Congress decided that the Web could be used for
commercial purposes. As a result, companies of all kinds hurried to set up websites of
their own, and e-commerce entrepreneurs began to use the Internet to sell goods
directly to customers. And today, World Wide Web is the biggest achievement we
have here.
The history of the Internet begins with the development of electronic computers in the
1950s. Initial concepts of wide area networking originated in several computer
science laboratories in the United States, United Kingdom, and France. In Nepal,
Though Internet was invented in the late 1980s, it was merely used as a
communication medium. It was not as fast as we experience it today. In the year 1993,
Internet facility was brought to Nepal by MOS (Mercantile Office Systems). Only
about 9.0% of Nepal population used internet in 2011. The increase had been rapidly
and of 2017, almost 54% used internet. Among many years, 2005 was one of the
biggest year for internet development of Nepal. Nepal Academy of Science and
Technology used E-mail services as the first instance of use of internet technology.
Mercantile Office System became the First ISP of Neal in 1994. It connected with
Singapore Telecom via 64 kbps leased line through NTC in 1995. After the year,
many new ISPs were established in Nepal and brought a revolution in the IT field.

1.2 Introduction of the Industry

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Internet service providers (ISPs) use wired infrastructure to provide clients with
internet access and related services such as web hosting, web page designing and
hardware or software consulting related to internet connectivity. Operators (except
telecommunications carriers) may also lease out capacity on their networks to support
the network infrastructure of other companies (i.e. backbone services). This industry
excludes wireless internet and VoIP services. There are 43 registered ISPs in Nepal
and 31 private ISPs whereas, except telecommunication service, Worldlink,
Merchantile, Subisu, websurfer has been dominating the market with a combined
share of more than 70%. These ISPs have a regulatory body: ISPAN.

Internet Service Provider’s Association (ISPAN) is the regulatory body and concern
authority for all the operations of ISPs in Nepal. It regulates and monitors all the
activities of those ISPs. Internet Service Providers’ Association of Nepal (ISPAN) was
set up in 1998 with a mission to develop and promote Internet for everyone. ISPAN
had originally started activities when ISPs like Mercantile, WorldLink, CCSL, HTP,
ENET came together with the purpose of making Internet affordable to local
communities and penetrate in the rural areas. ISPAN has been initiating continuous
dialogues with the Ministry of Information and Communication, Nepal
Telecommunication Authority, Nepal Telecommunications. ISPAN is in the forefront
of liaison with several Ministries and Departments for shortcomings in the License
Conditions. Internet services typically provided by ISPs include Internet Access,
Internet transit, domain name registration, web hosting, Use net service and
collocation. Internet Service Providers provides following product and services:
 Carrier and internet backbone services
 Dial-up internet access
 Residential broadband services
 Business broadband services
 Providing wired broadband internet access
 Providing wired narrowband internet access
 Providing internet backbone and carrier services
 Hardware and software consulting

1.3 Market of the Product/Services of ISP

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Internet is used by almost every areas of business. Nowadays, Advertising agencies,
Internet Publishing and Broadcasting, search Engines, Consumers etc uses internet to
derive services from them. Agencies uses internet for marketing whereas consumers
uses internet to get into the market of those product and services they requires. Not
only from marketing point of view, each individuals use internet to get information
about business and day to day livelihood. The major markets of ISPs are:

 Residential (Internet with TV also)

 Small Businesses
 Medium and large scale enterprises
 Other :
 Research based institutes
 Academic institutions like school, colleges, education centers
 Government of Nepal, Regional Government, central departments etc.
 Automations and automobiles
 Gadgets development institutes etc.

Internet Services Providers connects our computers and electronic gadgets with the
internet through wired as well as wireless medium known as WiFi. Nowadays, people
installs router through broad band connection and enjoys wireless internet services at
home. Following figure shows that internet connection in a home :

Fig: Internet connection inside home via Modem

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1.4 Major player of the Industry

ISPs has acted as major player for bringing reforms in Nepalese economy as well as
business because the amount of data that flows to internet within one single click is
tremendous, There are many ISPs in Nepal operating at this time. Some of the major
firms in the Market are:
 Wordlink Communication Pvt. Ltd.
 Subisu CableNet Pvt. Ltd.
 Merchantile Communication
 Websurfer Nepal Pvt. Ltd.
 Broadlink Networks and Communication Pvt. Ltd.
 Vianet Communication
 Classic Tech Pvt. Ltd.
 Techminds Network Pvt. Ltd.
 Broadband Solutions Pvt. Ltd.

1.5 Various Department of an ISP

There are various departments in Internet Service Providers which provides various
facilities to customers. The functional departments of ISP are described as follows:
1. System: The core of ISP is the System department. Bandwidth Management,
Monitoring the system, maintaining security within the organization which is
the major part of the ISP are operated through the System department. The
development teams are also the part of this wing of the organization which did
the in-house development of the organization needed application. They work
on overall controlling of the system within the organization.
2. Marketing/Sales: Marketing and sales is dedicated toward the business
strategy development and the department studies about customer and
competitor, follow-up and collection of the money and monitor the financial
transaction towards the products and client.
3. Human Resource: Human resource department handles the overall staffing of
the organization and their hiring and management.

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4. Account: The account department handles all the monitory organization. The
recording of the transaction and reporting is done.
5. Fiber: Fiber department looked at the issues regarding the development of
fiber based internet and its issues.
6. Wireless: Wireless department looked over the wireless internet expansion and
issues. They work on Wi-Fi connection and its other aspects.
7. Customer Relationship: The Department maintains the costumer relationship
among different users of internet service.
8. Support: Support department takes cares of the technical issues of the clients
and supports them. They receive our calls and transfer the calls into various
other respective departments.
9. Store: Stores are the area allocated for taking care of the material and keeps
stock of them.

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 CHAPTER II

RESULTS AND FINDINGS

2.1 Performance of the Industry

Internet has become most integral part of personal as well as professional life of an
individual. Today, internet has been widely used all over the world. Not only a single
transaction or click, we can see the application of internet in each and every gadgets
and business operation. There are various internet service player among them ISP like
worldlink, subisu and other play vital performace in the market. Customer agreed that
performance of the isp is one of the most pulling factor while choosing among
different isps in market. In the process of selection, they rated Worldlink performance
at a series-high four (3.9) out of five stars and comparatively a high quality internet
connection . It operates the one of the finest and the largest fiber backbone and access
network across the country serving 63 districts providing services like high speed
Internet up to 100Mbps along with HD IPTV services. It operates the one of the finest
and the largest fiber backbone and access network across the country serving 63
districts providing services like high speed Internet up to 100Mbps along with HD
IPTV services. Over the past 20 years, WorldLink has grown from a small business to
a strong and stable corporation with professional staff and a strong customer base.

Mercantile is the second largest ISP in Nepal operating today. It has a average rating
of 3.7 out of five stars. Mercantile, in fact, has become the first company that led the
nation in introducing new and appropriate information technology by giving
individuals and corporate world, the ability to use the Internet as a tool to make their
lives more productive and their businesses more profitable. Mercantile is continually
developing a new and innovative suite of services that make it a faster, easier, smarter
and uniformity in Internet. Mercantile also has been providing consulting services for
setting up Internet Services to companies not only in Nepal but also to neighboring
countries such as Bhutan and Bangladesh. Mercantile has also pioneered in providing
wireless communication in Nepal by introducing data communications through radio
modems and VSAT (very small aperture terminal) technologies that quickly puts
Internet access at the hands of the subscribers, regardless of their time and locations.

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Websurfer Nepal Communication is the third largest internet service provider with the
rating of 2.9 out of 5. It has one of highest subscribers in Nepal. Among five
development regions, Websurfer offers Intranet/VPA services with Metro Ethernet
LAN technology mainly focused on Central Development Region. Nowadays, it has
been working to extend its networks all over Nepal. Websurfer is upsetting as
benchmarking broadband internet performance that is essentially crucial for
consumers of Nepal and hence is focused more on internet subscribtion. They are
working on rich peering between different access points and investing in local server
infrastructure for getting better experience of internet. Following graph shows trend
analysis of internet being used in Nepal in last 5 years in terms among these above
mentioned three ISPs:

Internet Service Providers in Nepal

6.5
market share index

5.5

4.5

3.5
2012/13 2013/14 2014/15 2015/16 2016/17
Wordlink 4.3 5.6 5.8 5.9 6.5
Mercantile 4.1 4.6 5.1 5.3 6.15
Websurfer 3.8 4.2 4.7 5.1 5.8

Fig: Trend analysis of market share index of ISPs

The above line chart shows market share and increase index in numbers of new
startups internet through wired or wireless internet via ISPs in Nepal. This is the
analysis of last 5 years starting from 2012/13 to 2016/17. It clearly shows that
Worldlink is leading the market with maximum unit of increasing index followed by

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Mercantile and Websurfer in other consecutive places. Although the increase is in
quite less margins, we can see broader market for internet in Nepal because every
firms and individuals are now using internet for the day to day operation in business
of livelihood.

2.2 Porter’s Five Forces Framework in context of ISPs

Porter's Five Forces Framework is a tool for analyzing competition of a business. It
draws from industrial organization (IO) economics to derive five forces that
determine the competitive intensity and, therefore, the attractiveness (or lack of it) of
an industry in terms of its profitability. An "unattractive" industry is one in which the
effect of these five forces reduces overall profitability. The most unattractive industry
would be one approaching "pure competition", in which available profits for all firms
are driven to normal profit levels. Porter refers to these forces as
the microenvironment, to contrast it with the more general term macro environment.
They consist of those forces close to a company that affect its ability to serve its
customers and make a profit. A change in any of the forces normally requires a
business unit to re-assess the marketplace given the overall change in industry
information. The overall industry attractiveness does not imply that every firm in the
industry will return the same profitability. Firms are able to apply their core
competencies, business model or network to achieve a profit above the industry
average.
Porter’s Five Forces Model is used for assessing the nature of the competition and
attractiveness in an industry. The basic Porter’s five forces model is demonstrated in
the below diagram:

Fig: Porter’s Five Forces

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Five Forces in the context of ISPs are described as below:

1. Threat of new entrants: Profitable industries that yield high returns will
attract new firms. New entrants eventually will decrease profitability for other
firms in the industry. The following factors can have an effect on how much of
a threat new entrants may pose:

 Government policy
 Economies of scale
 Product differentiation
 Brand equity
 Industry profitability (the more profitable the industry, the more
attractive it will be to new competitors)

2. Threat of substitutes: A substitute product uses a different technology to try

to solve the same economic need. People may substitute from one ISPs to
another at the same price, they can derive more better quality service.
Following factors have effect on the threat:

 Buyer propensity to substitute

 Relative price performance of substitute
 Buyer's switching costs
 Number of substitute products available in the market
 Ease of substitution

3. Bargaining power of buyers: The bargaining power of customers is also

described as the market of outputs: the ability of customers to put
the firm under pressure, which also affects the customer's sensitivity to price
changes. The factors are:

 Bargaining leverage, particularly in industries with high fixed costs

 Buyer switching costs
 Buyer information availability
 Availability of existing substitute products
 Buyer price sensitivity

4. Bargaining power of suppliers: The bargaining power of suppliers is also

described as the market of inputs. Suppliers may refuse to work with the firm
or charge excessively high prices for unique resources. Potential factors are:

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  Supplier switching costs relative to firm switching costs
 Degree of differentiation of inputs
 Impact of inputs on cost and differentiation
 Presence of substitute inputs
 Strength of distribution channel

5. Degree of Rivalry: For most industries the intensity of competitive rivalry is

the major determinant of the competitiveness of the industry. Having an
understanding of industry rivals is vital to successfully market a product.
Potential factors are:

 Sustainable competitive advantage through innovation

 Competition between online and offline companies
 Level of advertising expense
 Powerful competitive strategy
 Firm concentration ratio

Thus, if we see the overall performance of internet service provider industry, it shows
that it is increasing day by day in all areas in our country. Keeping along the views of
Globalization, internet has become a huge aspect for modern generation. Every firms
and individuals are using internet in every activities such a business transaction. ISP
market matures, service providers that pay attention to affective factors and to
building relationships with their customers will have a competitive advantage in the
marketplace of the future.

2.3 SWOT Analysis

SWOT analysis is a strategic planning method used to evaluate the Strengths,

Weaknesses/Limitations, Opportunities, and Threats involved in a project or in a
business venture. It involves specifying the objective of the business venture or
project and identifying the internal and external factors that are favorable and
unfavorable to achieve that objective. Setting the objective should be done after the
SWOT analysis has been performed. Identification of SWOTs is essential because
subsequent steps in the process of planning for achievement of the selected objective
may be derived from the SWOTs.

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Strengths
These are the factor that characteristics of the business, or project team that give it an
advantage over others. Some of the strengths of the industry are :
 Very active in technical Help
 Has a powerful team of experience professionals.
 Quick and effective communications
 Lots of offers and free hours.

Weaknesses
The weakness or limitations are characteristics that place the team at a disadvantage
relative to others. Some of the weaknesses of the industry are:
 Not a very big team. Hence the work load was very much on one person.
 Have to work with only internal framework
 Numerous pricing tariffs and service options that fluctuates.
 Long subscription and connection process.

Opportunities
The opportunities are the external chances to improve performance (e.g. make greater
profits) in the environment. Some of the opportunities for ISPs are :
 Innovative marketing strategy
 New Information Technology development
 Increasing e-commerce and e-banking
 High focused on Globalization

Threats
The threats are the external elements in the environment that could cause trouble for
the business or project. Some of the threats are:
 New entrants and existing competitors
 Employee turnover
 Poor Government policies
 Software privacy and phishing

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 CHAPTER III

CONCLUSION AND RECOMMENDATION

3.1 Conclusion

From above analysis, There is no doubt that we want the best internet service at an
affordable price but with ever growing number of ISP in Nepal it isn’t as easy as it
sounds. Of course, the quality of our internet reflects our productivity, from browsing
the web to streaming videos from YouTube, our internet quality affects how much we
get things done. Today, ISPs can see a significant amount of their subscribers’
Internet activity, and have the ability to infer substantial amounts of sensitive
information from it. This is especially true when that traffic is unencrypted.
However, even when Internet traffic is encrypted using HTTPS, ISPs generally
retain visibility into their subscribers’ DNS queries. Detailed analysis of DNS
query information on a per-subscriber basis is not only technically feasible and
cost-effective, but actually takes place in the field today. Moreover, ISPs and
the vendors that serve them have clear opportunities to develop methods of
inferring important information even from encrypted data flows.

3.2 Recommendation

Thorough analysis and study of market information regarding Internet Service

Providers in Nepal suggest that ISP should follow few points while taking their day to
day operation in the market and to attract new customers:

 Internet Service Providers must make improvement in the customer care.

 They should always keep flexibility of the services in majority to hold the
existing customers and new customers from the competitive market.
 Internet must possess in order to provide the security, reliability and quality of
services

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 Discussion about the government policies and organizational issues that must
be resolved to make community more capable of adopting internet services in
both short term and long term.
 Employee motivation to reduce employee turnover.
 Strong protection from unauthorized user.
 If the organization wants proper survival in the competitive environment, they
should always cope-up with workers unions.
 Internet service is bound to be improved in terms of cost and speed with the
entry of new industrial giants in the field.
 The true benefit of internet service will be when even the remote parts of
world will be able to access the quality internet.

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 BIBLIOGRAPHY

 Erevelles, S.(2003). customer service on internet service provider. Neatherland

: research gate.
 Eric Ries (2011) : The Lean Startup
 Farnaz. (2014). the role of internet service providers in encouraging customer
to use their internet. international journal of business and science , 170-200.
 Karki (2015), Analysis of market share of IT
 The Himalayan Times and Kathmandu Post
 Porter : Strategic Management Book
 Websites :
o http://ispan.net.np/
o https://worldlink.com.np/
o http://www.mos.com.np/
o https://www.websurfer.com.np/
o https://www.internetsociety.org/
o http://dwitnews.com/internet-really-started-nepal/

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