The pure-play Internet access retail business might not be attractive for ISPs, but they are certainly bullish about cyber cafés. Today, at least in the cities, the cyber café is becoming more than a place to surf the Net.

For a Share of the Pie
The big names, Sify and VSNL, are doing brisk business in terms of usage through the cafés, and with the entry of Reliance Infocomm into the arena, through their Web World, the café war just got hotter.

Sify was one of the few ISPs who realized that real money would not be in the retail dial-up segment and started with company-owned as well as franchisee-owned iWays. The current split is 34 for company owned and rest of the 2004 are with franchisees. The brightly colored cafés with swanky cubicles have caught the surfers' fancy. With its 2004 iWays in 67 cities, Sify is a business leader in the segment.

VSNL increased its presence after the acquisition of Dishnet. After consolidating the Internet services under one brand name, Tata Indicom, VSNL is also trying to emerge as a branded cyber café company. Currently, the company gives connectivity to 700 cafés in 32 cities and owns 50 of them.

Reliance Infocomm is following the franchise model for its Web Worlds. These double up as the sales and service channels for Reliance Infocomm's products and also have coffee bars and offer broadband Ethernet connectivity. The company is planning to double the number of 250 Web Worlds. At present they are present in 110 cities. However, their broadband applications are available only in 14 cities and will go up to 100 by the year end.

The incumbents, BSNL and MTNL, have not entered the cyber café business directly but in many places the private café owners use their connectivity. BSNL is also involved in the Sanchar Dhaba project of DoT. These public tele-info centers fulfill communication needs, including Internet services, of the villagers. At present, all the district headquarters have been connected under this scheme.

The Changing Face
The focus is now on how to provide more value-added services and applications. From the pure-Internet-access days, cyber cafés are now concentrating on applications like video chat and conferencing, multiplayer multi-city online gaming, digital music and movies, and digital imaging. For some users, they also double up as virtual offices. This change will drive ISPs to take their business forward. The experience in the new cyber cafés is good and the user is also ready to shell out more money for new apps.

Already some of the ISPs are creating Wi-Fi zones for mobile executives and are provisioning for IP-telephony booths in their café for the retail users. The idea is to offer complete, one-stop, end-to-end broadband applications to the users. There are many ways to approach it. For example, Tata Indicom's expansion plan would be to consolidate on the current services and develop broadband services and content application for various target segments, rather than opening more cafés.

The ISPs will also look to branch out certain applications like gaming, which have been a major driver of Internet services in countries like South Korea and Japan, as a separate business. Sify would probably be the first company to come out with a separate business model with its gaming dromes. The company already has three of these in Chennai and would be the first ISP to offer exclusive gaming cafés, as distinct from cyber cafés.

What Makes Them Click?
The success of the cyber cafés can be attributed to the high call charges and slow connectivity of retail dial-up connections. Cyber cafés offer better speeds at cheaper rates. The business would be threatened only if the broadband recommendations of TRAI are accepted in full by DoT; and cost of access is brought down drastically, more desktops reach Indian homes, and retail connectivity improves dramatically.

Anurag Prasad

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