• OTT services substitute the demand of traditional voice/SMS services and complement data demand, with the AIDS model showing significant negative and positive coefficients, respectively. • A severe data revenue paradox exists that data consumption grew 833 % but revenue only 377 % as unit price of data fell by 96.84 %. • Outdated regulations and high taxes intensify the crisis, as regression shows each 1 % tax burden reduces annual revenue growth by 0.22 %. • Cost Sensitivity is the prime OTT driver, making younger users 6.17 times more likely to choose OTT over telecom voice service. This research explores the multifaceted challenges confronting Nepal’s telecommunication sector, analyzing the reasons customers are shifting to OTT platforms, the economical, technological, and legal factors that have restructured the telecom industry landscape from 2014 to 2024. The findings reveal a sector in transition, marked by diminishing voice revenues (37.4 % decreases) and eroding profitability regardless of exponential data consumption growth (833%). Technological disruption from OTT platforms has speed up the decline of traditional voice services (62.6 % fewer active users, 84.13 % less traffic), while infrastructure pressure remains from concurrent needs for legacy systems maintenance alongside next-generation investments. OTT is replacing traditional voice/SMS, making their traffic negligible. Econometric analysis using an Almost Ideal Demand System (AIDS) model elucidates that OTT penetration substitutes traditional voice(Coefficient =-0.0021, p<0.01), whilst simultaneously functioning as a complement to data demand (+0.0018, p<0.01). Notable negative correlations are observed between the adoption of OTT and performance metrics of the sector (OTT-voice revenue: r=-0.91, p<0.001; OTT-ARPU: r=-0.88, p<0.001). Regression analysis confirms that regulatory burdens and inadequate infrastructure intensify OTT-induced decline, with tax burden and insufficient infrastructure investment. Outdated laws, high telecommunication taxes & high license fees, retrospective spectrum fee, and limited foreign investment constrain suffocating innovation add to the problems regulatory authorities create. This underscores an urgent need to reform the outdated telecommunication law/policies, high telecommunication Taxes/fees, and challenges posed by OTT.
Madhu Sudan Dahal (Wed,) studied this question.