What’s the latest meeting point for the teenagers? It's not the fast food joints at the corner of the street nor is it the computer training institute. Cybercafes have sprouted all over the country. More than just being meeting points, these centres have become a source for newer avocations like making friends and getting the latest information about international universities. In fact, today cybercafes are the driving force behind the Internet usage growth in the country.

Fuelling the growth of the cybercafe culture are big Netpreneurs who have evinced keen interest in establishing branded cafes across the country. Satyam Infoway, Junction96 and Dishnet Hub, to name a few, are making inroads into the otherwise unorganised sector of cybercafe business. From being just a room with a few computers working on one dial-up connection, the newer versions are coming out with sophisticated décor and are providing high-connectivity through ISDN lines. But are the branded cafes taking over from small players? Or is the small player forced to join the bigwigs to stay in the market?

Going by the initial euphoria created by the big players about this new business opportunity, the small firms are likely to face a tough time as the former are well-equipped to provide better facilities. The war is getting hotter as the small chain of cafes like Hyderabad-based and country's first chain of cybercafes, Citi-Net, and other individual cafes are gearing up to face the competition.



Anatomy of the Users

Initially, the use of cybercafes was restricted to sending and receiving mails from friends and relatives. From there it has gone on to chatting and now slowly getting into the mode of being used for information gathering. Says B.V. Mohan Reddy, Managing Director of Citi-Net, "When we started cybercafe in Hyderabad in 1998, there were very few people who used it and that too only for mails. We had to educate them about the uses of the Net. Today, the scenario has changed completely. These cafes have played a major role in spear-heading the Net revolution in the country."

Before the advent of the cybercafe concept, the computer centres or dromes were offering the services of people getting the mails. Since 1996, computer dromes in several cities were helping people communicate through modern technology. But people were not allowed to directly access the Net or their E-mails. The centre in-charge allowed customers to distribute his E-mail address to their friends and relatives. The in-charge was the only person who had access to the Net and once in an hour or so he took printouts for various people. People had to pay something between Rs 7-25 to get the printout of their mails/documents.

Bangalore saw the so-claimed India's first cybercafe in mid-1997 at its posh MG Road locality. Customers browsed the Net for Rs 120 per hour, with a cup of coffee offered free. Thus originated the concept of cybercafes in the country.

V. Kannan, Vice-President (Internet public access), Satyam Infoway, says: "The primary audience is in the age group of 18-35 — people who are about to complete their education and set foot into the real world, and young employees who have a long and bright future ahead of them. Their realisation of the need for the Internet is higher, and at this stage of their lifecycle, investment in a PC at home is low down on the priority list. They find cafes a convenient place for their Net needs.

From offering Internet access for Rs 120, the rates have come down to around Rs 25 per hour. And in tune with the demands, the slow dial-up connection has been replaced with high-speed ISDN lines. "Gone are the days when we could get away with dial-up connection. Today, customers demand more bandwidth and faster access. If we have to stick in this business we need to have the best facility and ISDN helps customers to browse with much ease. Hence, though a costly investment, we have gone ahead with having an ISDN connectivity for our centre," points out Manjunath, owner of Flash Cyber Centre at Mathikere in Bangalore. The locality alone has nearly 35 cybercafes of which 25 have ISDN connections.

Porn and the Chat

The cybercafes have proliferated into every nook and corner of the country. Even a small town like Kolar Gold Fields (KGF) in Karnataka boasts of over 30 cybercafes. And most are doing well. "Basically, visitors here arc students who come for chatting and watching 'hot' sites. These people are spending their pocket money on accessing the Net instead of going to films," observes Thamizh Selvan, a cybercafe owner from KGF.

"Today the Net is mostly used for E-mail and chat. Browsing for information, FTP, scanning and printing are also growing substantially. Voice chat and video-conferencing will grow too as and when the bandwidth issues get resolved," says Raj Shekhar Agrawal, Managing Director of Junction96.

However, not everybody uses cybercafes for these reasons alone. In Rajahmundry, a town in Andhra Pradesh, it is mostly the elderly people who frequent the centres. The reason: in almost every family there is a relative in the US. These people have learnt using the Net for its much cheaper than other modes of communication.

Apart from satiating communications needs, these cafes have been the birthplace of many dotcoms. "During the dotcom boom last year we saw many small-timers using these places for uploading their pages and getting pictures scanned. Today, these numbers have reduced but fortunately there are still a few holding their homepages from cybercafes," says Reddy of Citi Net.



Advent of Branded Cafes

Till recently the cybercafe business was considered to be the best bet and a cost-effective business option for many. "Which other business can you launch with around Rs 2 lakh that can give you good returns?" questions Manoj Desai, who started a centre in Hyderabad after trying his hands at various other business opportunities.

However, for small players it seems the party is over, mainly with the advent of branded cafes. With huge money in their kitty, big players like Satyam Infoway, Dishnet and Punj Lloyd are seriously considering this as a new opportunity. Says Kannan of Satyam Infoway, "Sify is a leading player in the Internet space and we see public access (cybercafes) as a critical and high-potential area of business, especially given the infrastructure issues in the country, coupled with high cost of telephony and PCs. Cybercafes will drive Internet penetration ahead of PC penetration. Hence the entry into the cybercafe business."

Satyam Infoway has branded its cybercafes as Iway. Currently the company is operating its 200-odd cafes in Five cities—Delhi, Mumbai, Chennai, Bangalore and Pune. The company is providing access through its own ISP leased and dedicate lines. It is planning to have at least 500 centres across the country by the end of the year. Though it is one way to help boost the firm's ISP business, Satyam Infoway is not taking this opportunity lightly. "It is a stand-alone business based on other larger objectives. Synergies that accrue to other businesses are incidental," says Kannan.

On the other hand, we have another ISP. Dishnet DSL, which had marked the beginning of branded cybercafes in the country with the launch of Dishnet Hubs in most of the southern cities. Being a DSL the connectivity is faster. But it is the pure-play cybercafe, Junction96, that is creating a lot of flurry in the market. The company, not backed by any ISP, is offering ISDN line connectivity to all its users. At present there are around 100 Internet parlours spread across eight cities—Bangalore, Mumbai, Delhi, Kolkata, Chennai, Hyderabad, Pune and Indore. Junction96 had received a $2 million funding from eVentures. "In the second leg of its expansion, Junction96 will aim at driving Internet activity throughout the nation by reaching out to the mini-metros and towns," says Raj Shekar Agarwal, Managing Director of Junction96.

We also have new players like Godrej & Boyce and Punj Lloyd, which are planning to enter the cybercafe arena. Punj Lloyd has joined hands with Delhi State Industrial Development Corp. (DSIDC) to open 20 cybercafes. It plans to launch seven franchise cybercafes immediately to boost E-governance. Chairman of Spectranet Atui Punj said his firm would provide broadband connectivity to the DSIDC cybercafes, adding that Spectranet would also offer marketing support as well.

The Market Spread

With so many big players entering the fray, is the business proposition worth the trouble? To answer this, the industry people opine that the level of PC penetration in the country is very low and that the upper-middle class is roughly over 70 million individuals. This is a large untapped market for Internet access, which can be reached very effectively by Internet parlours.

Interestingly, 17 per cent of Internet-connected homes also use cybercafes because of higher speed and lower costs of access. It is said that 60 per cent of Internet users in India access the Net from these centres. "Internet growth in India is expected to take the number of users from 3.1 million people today to 23 million by 2003, most of whom would be accessing the Net from the parlours," says Agarwal of Junction96.

Justifies Kannan: "Any business that has a large demand is viable. The expansion of the Internet through offices/homes is unlikely to dampen the demand for cybercafes in the near future."

Speaking about the viability, the Managing Director of Junction96 points out, "To begin with, our focus is on the Internet access and retail. That's our core business and the reason for existence. Unlike other players this is not just one of the many businesses we have."



Different Strokes

What is the difference between the services provided by a street-corner cafe and those provided by the big players? Answers Agarwal of Junction96, "For the surfers, we offer a conducive environment for comfortable Internet surfing with the advantages of ISDN connections, convenient locations, high-quality branded hardware and that too at affordable rates. The customer service offered at parlours is yet another factor that makes us different. We have a trained and friendly staff who helps surfers with most of their queries. We also have plans to offer facilities like video-conferencing, voice chat, E-commerce fulfillment and other value-added services."

But do these make any difference to the customer? Basically they are not much bothered about the ambience or the hardware they use. It is the speed and the machines that matter to these people. They want to make the best use of the Net as long as they are in the centre. "Most of the centres are not well maintained. The systems break down frequently, the power goes off or the Net gets disconnected. This doesn't happen that often at a branded cybercafe. This is the reason why people prefer these centres and not the smaller ones," points out Jai Krishna, a student in Pune.

This growing realisation has already affected small players. In Hyderabad alone 60 cybercafes closed shop in the last three months. Industry watchers say the cybercafe business is going the cable TV way—with the emergence of major cable service providers like Siticable and IN Cable, local operators had to give up the business or be a part of the larger set-up. But with improved services, it looks, the customers aren't complaining.