NAIROBI’S CYBER-CAFES UP AGAINST THE WALL AS COMPETITION BITES

30 August 2002

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The Kenyan cyber-cafe market is overcrowded. Too many cyber-cafes are chasing customers by offering unsustainable access rates. Last month five cafes closed, one of which operated a major facility. Cafe operators who want to survive are now having to look to providing something other than low price internet access. Russell Southwood spoke to Irene Mkwenda of Nairobi Business Cyber.com about the problems operators face in a tight market.

 

Nairobi Business Cyber.com operates two cyber-cafes, one of 28 machines (next to the Hilton) and the other of 12 machines in Kenya Cinema Plaza. The users of the two facilities are very different. The one next to the Hilton attracts a mixture of business people, tourists and international students with only about 30% of its clientele being made up of local people. The Kenya Cinema Plaza facility has much more diverse local use base but with a significant proportion of students. Her main competitors are the larger cafes nearby (like the one operated by NairobiNet) that can take advantage of cheaper bandwidth because of their size. Also some are on cheaper first floor locations against Mkwenda’s ground floor prime location.

 

Rates at both outlets are KS2-KS3 per hour depending on whether the use is at peak or off-peak times. Rates have stabilised but are still probably too low. The rates are the same for both facilities but Mkwenda believes that the local users for Kenya Cinema Plaza would be afraid of using the city centre cafe. Peak times are the same for both facilities: 11am-2pm and 4pm-6pm. At the site next to the Hilton she estimates that she sees 100-150 people a day, most of who are repeat customers, except of course tourists.

 

Its bandwidth is supplied by ISP Kenya who charge just over US$1000 for 128K. In addition she pays US$200 per month for a Kenstream line. Other major costs are rent and staffing: she pays KS100,000 for renting both premises and KS150,000 for salaries. For example, she employs 4 IT-trained customer staff at the cafe next to the Hilton as well as a receptionist, a messenger/night watchman and a person to deal with tourism business (see later).

 

She believes that there are several reasons that cafes are closing. Few are able to offer reliable bandwidth (and get premium prices for it) and therefore customers can be fickle. There are simply too many cafes who are operating predatory pricing in the hope that they will be amongst the "last ones standing". As many cafes are operated as small family businesses, owners feel they can afford to hang on. Some are simply spaces alongside other businesses like shops or eating places and are therefore a "side-bet" justified by bringing in customers. Few are genuinely diversified service outlets meeting customer needs:"Many cyber-cafe owners are managers but they don’t know how to do it."

 

At the outlet next to the Hilton, Mkwenda has opened a tourist information centre that can also take bookings as a fully fledged tour operator. It is also a cell-phone dealership, selling both phones and pre-paid cards for the major brands. Alongside which it offers coffee and soft drinks. None of this "rocket-science" but it has quite carefully thought about the kind of "add-on" services its customers might want while they are sorting out their e-mails and browsing the web.

 

Reliable bandwidth is a considerable problem as the cafes struggle to survive. Unfortunately because the culprit is not always clear, it allows the bad to survive alongside the good. If you’re an operator with too little bandwidth for the amount of machines being used and customers complain about access speeds, you can always blame Jambonet or your ISP. The ISP in turn can blame Jambonet, whatever the situation.

 

But worse still are the periods of connectivity down-time. In August Mkwenda suffered whole weeks and days where there was no connection for half the time. As a cafe with a university-trained system administrator she is at least in some better position to start chasing where the problem lies. But there are no realisable service obligations on Jambonet to refund the cafe for periods of down-time: "We’re not getting the service and we’re still paying for it."

 

However it may not always be Jambonet that is the villain of the piece in terms of bandwidth quality. Several people we spoke to pointed the finger at the up-link provider. A service that is multiplex bursted will be less reliable than one that is not contended. As one supplier put it: "It is my view that the role of the ISP is to burst its service around its subscriber base. However, if the ISP’s provider is contending its service what impact does this have on the ISP’s service to its subscribers? To use a simple analogy, you can only pour so much water through a pipe".

 

In these circumstances, the current consolidation in the cyber-cafe market will continue and there will be more closures in the coming months. Don’t say you weren’t warned...