Enhancing Rural Internet connectivity through an extended internet cafe business model
ITS 201219th – 21st Nov. 2012, BANGKOK, THAILANDEnhancing Rural Connectivity through anExtended Internet cafés Business ModelsIdongesit Williams, Patrick Ohemeng Gyaase and Morten FalchAalborg University Copenhagen
3INTRODUCTION• This paper explains how the internet café business model available in African citiescan be extended to rural areas by means of a partnership between the public andPrivate sector.• The problem is the lack of internet in rural areas as a result of those areas beingcommercially unviable.• The hypothesis adopted to enable this research was based on the idea; traditionalsocieties could transform into developed or modern societies if the process of socialchange followed the same pattern as that of the developed countries (see Fukuyama,1995; Inglehart & Baker, 2000; Mark, 2009). This aligns with modernization theory.
4Hence the Internet café business model if extended to rural areas in Africa can enablepenetration of internet services as experienced in Cities in Africa.
5The question?How can the commercial unviability of rural areas be conquered to encourageInternet Café entrepreneurs to develop internet cafés in rural areas?
6METHOD• To answer this research question, the Internet Café business model in Ghana is chosenas a case. Investigations are made into factors that encourage the development ofInternet cafés in cosmopolitan areas in Accra and Sunyani. Further investigations weremade to understand why the Internet Café business model does not thrive in ruralareas and the availability of Internet network infrastructure in rural areas• A mixed method approach was adopted for data collection. Data was collected viainterviews, questionnaires, literature review and observations (site visits)• Snowballing and purposive sampling methods were used to identify the respondents• 30 responses were gathered. 25 from Internet café operators and 5 from MobileNetwork Operators (MNOs)• 16 questionnaire responses, 5 face-to-face interviews, 5 telephone interviews and4 email responses.
7RESULT 1Table 1. Present Business Model in the cityKey PartnersInternet Service ProviderHardware/Software providersUtility Service ProvidersOffice landlordValue Proposition RequirementTelecoms / IT NetworkValuePropositionsInternetaccessibilityInternet service atlow priceInternet serviceeither 16 or 24hours a dayInternet servicewith high/lowspeedCustomer RelationshipsPersonal assistanceCustomer SegmentsMass MarketKey Resources for Value PropositionFinancialPhysical (components for the cybercafé)HumanChannelsHand billsBannersRadio AdvertsCost StructureFixed cost: Rent, Utility bills, ISP bills, tax, Salaries, amortization, cost of equipmentRevenue StreamUsage fee, Subscription fee,Price is volume dependent (charged per hour)Osterwalder Business Model Canvas
8RESULT 2Table 2.Reason whyInternetCafés boomin the cityQuestion SA A I D SDTo what extend did the following influenced your decision to set up Internet CafeAvailability of Network Infrastructure 20 5 0 0 0Demand for Internet Service 22 3 0 0 0Tax Exemptions 0 1 5 7 12Cheap of Connectivity 2 4 2 8 9Low start-up capital required 5 6 3 5 6Low cost of Hardware required 4 2 2 10 7Constant and reliable Internet Services 7 9 4 2 0Constant and reliable Power Supply 5 4 6 6 3Trained ICT specialist, (Profession) 5 5 8 4 3
9RESULT 3Table 3.Why the ruralarea is not attractiveto set Up internetcafésQuestion SA A I D SDAbsence of Internet Café in the rural areas and reasonsI intend setting up similar enterprise in the Rural areas 0 0 3 2 20Absence of Connectivity infrastructure 23 2 0 0 0It is expensive to set up due to Technology required 22 3 0 0 0High cost bandwidth 20 3 2 0 0High running cost 12 8 5 0 0High Cost of CPE 9 8 3 4 1Low Demand for Internet Services 18 5 2 0 0Tax pressures from Local governments 2 2 8 8 5Lack of Constant and reliable power supply 3 5 5 6 60510152025SASA
10RESULT 4Table 4.What incentiveswill make theseinvestors developInternet Cafés inrural areasQuestion SA A I D SDTo what extend would the following influence your decision to set up Internetcafé in the rural area.Cheaper rates for Bandwidth to rural areas 9 7 2 4 2Provision of Network Infrastructure 8 8 1 5 3Cheaper hardware (CPE) through subsidies 10 6 0 6 3Presence of demand for Internet services 0 2 5 10 8Provision of equipment and start up bygovernment9 8 3 3 2Tax Incentives 7 7 3 5 3
11RESULT 5 Questions A I DOur services cover large part of rural areas 5We provide Internet services in the rural areas 3 2Our network infrastructure in the rural areas support high speed Internetconnectivity5There low demand for fast Internet in the rural areas 5Cost of equipment does not make it economical to deploy fast Internet in therural areas5Deliberate public support could facilitate the deployment of high speedInternet connectivity3 2There is no tax incentives for deploying fast Internet connectivity 4 1Tax incentives would facilitate the deployment of fast Internet connectivity 3 2Table 5.Availability ofInternetInfrastructure in ruralAreasThere is Internet infrastructure in rural areas but not broadband. So thereIs connectivity . But the cost to accessing this connectivity as seen in result 3is high.
12PROPOSITIONSBased on the results received it is glaring that for the internet café business modelto be developed in Rural areas, there is the need for government intervention throughPublic Private Partnerships (PPP).The Build Operate Own (BOO) model of PPP is proposed. The organization of the modelis seen in figure 1 belowRemoval of market entrybarriersTax reduction for ISPs whodeliver data rates a cheaperrate to investors in ruralareasRemoval of import tariffsfor CPEsDecision of theentrepreneur tostart an Internetcafé in rural areasActualdevelopment of theInternet cafeSubsidy provision for the cost of access ofthe serviceEnd userBOOSupplyCheaper cost of access to servicePublicInitiativeDemand
13Table 6. EXTENDED BUSINESS MODELKey PartnersInternet Service ProviderHardware/Software providersUtility Service ProvidersOffice landlordNetwork operatorsPublic sector**Value Proposition RequireTelecoms / IT NetworkValue PropositionsInternet accessibilityInternet service at low priceInternet service either 16 or 24hours a dayInternet service with high/lowspeedCustomer RelationshipsPersonal assistanceCustomerSegmentsMass MarketKey Resources for Value PropositionFinancialPhysical (components for the cybercafé)HumanMarket incentive from public sector**ChannelsHand billsBannersRadio AdvertsE-government programmes**Cost StructureFixed cost: Rent, Utility bills, ISP bills, tax, Salaries, amortization, cost of equipmentRevenue StreamUsage fee, Subscription fee,Price is volume dependent (charged per hour)Limited Subsidy from the Public sector**
14CONCLUSION• With the present cost of connectivity, economic and social situations in ruralareas, it is impossible to establish the Internet café business model.• Market incentives are needed to prop the demand and supply side in the deliveryof internet café . The BOO model of PPP can enable this as seen in the results.• The public sector cannot be left out and there is need for e-governmentprogrammes to prop demand while subsidies and regulation incentives to propsupply.• If the BOO model of PPP is in adopted with the corresponding supply and demandincentive mechanism’s the Internet café operators are willing to extend thisbusiness model into rural areas.• It is possible to extend the Internet café business model into rural areas.