July 9, 2009

Cyber Café: No Longer a Profitable Business

Cyber café is no longer a worthwhile trade and the sector observed idle escalation over the last four years due to lack of regulations and outrageous price wars. Cyber cafés across the country in 2005 was 800. The figure remained the same in 2009, according to a study by the Cyber Café Owners Association of Bangladesh (CCOAB).

"Swelling dealing costs, price wars and a lack of discipline in the sector are the main setbacks to growth," said Ashfaquddin Mamun, senior vice president of CCOAB. Virtual cafés thrived largely after Bangladesh connected with submarine cable in 2006 and young entrepreneurs came forward to set up cyber cafés in parts of the capital. Later, the business mushroomed in divisional cities.

According to CCOAB, there are around 2,000 cyber cafés across the country, while a best part does not function with commercial purposes. Several entrepreneurs operate with two to three computers
in their home or along side another business, which should not be counted as a commercial cyber café business as such, said Mamun, who runs a café at Indira Road in Dhaka with a capacity of 13 users.

"The problem with non-commercial cyber café operators is that they charge low prices, and it becomes complex for us to compete in the market," he explains. Presently, cyber café owners charge Tk 20 to Tk 25 for an hour to browse the World Wide Web. Mamun admits that the government's bandwidth price cut helped them to shrink a percentage of operating costs. But other costs, such as electricity, space rent, staff salaries, generator charges, and maintenance costs, have doubled in the past few years.

The Bangladesh Telecommunication Regulatory Commission (
BTRC) designed a guideline for cyber café owners last year, under which, café owners were mandated to be licensed. As of today, only 70 owners took the license. "So, no mechanism exists to bring complacency in the sector," said the CCOAB senior vice president.

Morphing consumer needs still provides a ray of hope for growth of the sector. Students and job seekers are the top café users, who in addition to academic purposes and posting online résumés, most commonly log onto Facebook and other social networking sites. Citing a recent online job circular by Bangladesh Bank, Mamun said people rushed to his café to fill the required online form. "Similarly, when people solicit increased services on the net, business for them would boom eventually," he said.

In Bangladesh, internet penetration increased over the past few years exponentially. The growing popularity was mainly because of rapid mobile internet growth and availability of low-priced computers and laptops in the market. According to industry insiders, more than 90 percent of the internet users are connected by mobile operators. Local internet service providers connect the rest.

Telecom operators are now selling internet modems at Tk 4,000 and they charge Tk 500 to Tk 850 in monthly line rents, which is partially to blame for sluggish growth in the cyber café businesses. The number of internet users jumped over the years due to rapid mobile internet growth.
GrameenPhone and CityCell are also selling internet modems, which is becoming a vogue among students, who also happen to be the main cyber café visitors.

"The sector has not developed in recent times. But because the technology is still beyond the reach of the commoners, demand for cyber cafés is expected to surge," said Johirul Hossain, president of CCOAB.


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