MUMBAI: When cyber cafés began mushrooming across Indian cities they were considered a window to the world, a source of knowledge and information. Parents and teachers were a happy lot, expecting the youth to make full use of the new technology.
But, having coming under constant security scanner and being touted as shady joints promoting vices, the industry seems to be in the doldrums, with a majority of small players exiting the business.
There are about 200,000 cyber cafés in the country with more than 80% owned by individuals. Say café owners in the city, “It is getting difficult to conduct business with impending cyber café regulations and escalating operating costs. An average private cyber café gets about 50-60 footfalls in a day while the likes of Reliance Web World have 125 footfalls per day per store.”
Says Dilip Chaitalia, a café owner in South Mumbai, “Our footfalls have gone down by nearly 50%, with overall business decreasing by as much as 25%.” Also the cost of technology is rising with the advent of faster printers, webcams and regular software upgrades, he adds.
Café owners say business has been hit mainly by the impending regulations to police the cafes. “Our net earnings are even lower than a salaried job for the same skill set,” says Neelkanth Shanbaug, owner, Grafiti Cyber Café in Mumbai.
Where we used to earn Rs 100 an hour a few years ago, the rate has gone down to Rs 10-15 an hour along with the usage time. And now with regulations stating there would be a need to maintain an electronic log book of customers and monitor activity in the café, our costs would increase even more driving down margins, he adds.
Asserts Sarup Chowdhary, Director & CEO, Reliance World, “The compliance with the new rules and regulations would ensure a secure access but one that comes at a cost.” To put into effect rules like customer identification and constant monitoring of the premises, would mean an addition to the operating expenditure for all the players.
While the bigger cafes would be better off with this back-end addition it would be damaging to the smaller individual players, he adds. Reliance World which has as many as 25 outlets in the city offering internet access has not seen any physical growth in this number since its inception. An increasing number of smaller players are putting their hands up and saying they cannot afford to pump in the excess capital needed for the business.
Experts say that the biggies like Reliance can afford to play the volume games they can house as many 5,000 PCs in their cafes, the small guys can do with only 5-6 PCs. The downtrend in the industry may also be a reason why Reliance World now offers value-added services like video conferencing, video resumes and video mails to attract more users.
The fall in the use of cyber cafes is reflected in a recent survey by the Internet and Mobile Association of India (IAMAI) and IMRB International has revealed cyber cafe users have declined from 52% in ’03 to 39% in ’06. Increased home PC usage and higher broadband penetration is also affecting cyber cafe footfalls. However, not all industry players believe cybercafes are becoming less attractive.
According to a latest survey conducted by AC Nielsen, as many as 34% users now surf the internet from cybercafes, 30% from home, while internet users from offices have fallen to around 20%. Explaining the fall, Dr Subho Ray, President, IAMAI says that the rise in Web 2.0 applications like blogging and the growing e-commerce business have also contributed to an increasing number of users preferring the privacy of their homes over public access points.
Says Ashish Saboo, president, Association of Public ICT Tools Access Provider, less dependence on shared access and stricter regulations are making the case worse for the small entrepreneur in this industry. “The opportunities are huge and globally the e-commerce business is growing but the odds are stacked against us,” he adds.
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