KENYA’S CYBER CAFE OPERATORS ASSOCIATION TRIES TO RAISE RATES

8 March 2002

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Kenya’s newly inaugerated Cyber Cafe Owners Association (CCOA) is trying to get cyber cafe access rates back up by getting its members to agree to raise prices simultaneously. The cyber cafe sector in Kenya has too many operators who have too little understanding of how to make a profitable business. There are some operators (whose figures we have been through with them) who are currently literally giving money away.

 

The weakness in the strategy is that CCOA is in a funny way a little bit like OPEC. It has a lot of potential members who presumably will control a largish percentage of the market. They all know that the current prices cannot be maintained. However there are always going to be those who will not "hold prices up" and will seek to gain an advantage by setting their price below the agreed level. It is not in the nature of a competitive market with this many players that a strategy of this kind can be wholly effective. Furthermore consumer reaction - judging by what we have already heard - will be largely hostile.

 

The African ISP consumer market in which they operate has been described by Arthur Goldstuck (in another context) as "the froth on the surface" with "razor thin margins" and "absurdly high customer expectations". (see People and Jobs below) This is a dilemma for everyone seeking to operate in this market. They are caught between the need to lower access rates to enlarge the market and being able to offer less and less if they do so. In this circumstance, the CCOA probably needs to be arguing access rates down with Kenya Telkom and/or banding its owners together to buy bandwidth on the basis that the more you buy, the cheaper it gets.

 

The African connectivity consumer is the great unknown in all these arguments. Thus far he or she has had to put up with (in most circumstances) appalling service, high access costs and companies that often seem to be run solely for the benefit of their employees. Their has been no service agreement (or one worth the paper it’s printed on) that expresses the contract between customer and company: for example, no detail of call out times or the wait for line installation. Up till now, the consumer’s voice has been largely unheard. With greater levels of competition this will change and the smart companies need to get ready for this change. Telkom’s initiatives below may sound like PR "puffery" but it seems to have grasped this shift sooner than others on the continent.

 

Those like CCOA - caught in the crossfire in a difficult market - need to be open with their consumers and educate them about the costs involved in their operations. If they do not, they will find that the consumer sees them as "the enemy" rather than the incumbent telco that defines the cost of the commodity they sell: the bandwidth itself.

 

The newly formed Cyber Cafe Operators Association (CCOA) has announced that its members will charge KSh3 a minute, or KSh180 an hour, up from KSh1 a minute, or KSh60 an hour to combat what it sees as loss-making competition. It believes that inexperienced operators have entered the market and are currently trading unprofitably. Prices have gone down from Sh10 per minute three years ago to Sh1 currently.

 

"We acknowledge that this new rate (of KSh3) of access is still below world averages of the equivalent of KSh4 to KSh5 a minute," said association chairman Stephen Onyambu. The decision was taken at the CCOA’s inaugeral meeting. "Cyber Cafe operators have mandated the CCOAK to enforce the recommendations that were arrived at the meeting," Mr Onyambu said. How they will enforce the prices set is not clear.

 

Reflecting the level of anxiety in the market, the turn out was tremendous with over 250 cafe owners attending the meeting. High quality service, a code of conduct, & improved partnership with the ISPs were among the crucial issues discussed.Although CCOA has attracted a wide range of potential members, it will be interesting to see whether it has the power amongst its membership to make these rates stick.

 

SA’S TELKOM WINS PLAUDITS FROM CONSUMER GROUPS

 

In a continent beset with incumbent telcos that barely pay attention to their customers, SA’s Telkom has won praise from two leading South African consumer bodies for its support for consumer rights as the country gears up for the International Day of Consumer Rights tomorrow (Friday, 15 March 2002).Telkom has demonstrated its support for consumer rights by sponsoring the maintenance of the National Consumer Forum (NCF) Call Centre and Consumer Complaints Handling Service.

 

The Call Centre and Consumer Complaints Handling service was launched on 15 March 2001 to advise consumers on consumer-related issues, and to deal with consumer complaints. According to the NCF’s chairperson, Tami Bolani, consumer complaints to the value of R1 million have been successfully resolved in favour of consumers over the past year. Telkom has also played a significant role in boosting consumer rights through its ongoing funding of the South African National Consumer Union (SANCU) consumer booklet, entitled ‘The Self Help Approach to Consumer Problems - How and Where to Complain’. The booklet is simple to read and contains consumer tips and consumer hotline numbers, and has guidelines on how to write a letter of complaint.

 

Telkom has commissioned one of South Africa’s foremost consumer rights advocates, Isabel Jones, to help identify problem areas in Telkom’s service delivery. A series of investigative videos featuring Ms Jones has been produced to enlighten employees on problems customers experience with Telkom’s service. The videos also share solutions workshopped by employees at the coalface and adopted in policies by management.

 

INDEX

 

 

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