Once a lucrative business generating millions of employment for young Nigerians, the fortunes of cybercafés are now declining steadily due to skyrocketing operational cost and influx of cheaper and innovative mobile Internet technologies
When ZEAL-NET Cybercafé opened its doors for business in 2008, it was an instant success, as it became the toast of many people who wish to have access to the Internet. On daily basis, the cybercafé located on Shonola Street, Ogba, Lagos, was a beehive of activities as men, women and students, thronged the place to browse the Internet. To the envy of other cybercafés located around the area and the delight of its owner, ZEAL-NET Cybercafé was getting an average of between 20 and 30 customers a day or 140 customers a week. At some point the number of customers went a notch higher, hitting 200 per week for day and night browsing. It was not long before it peaked at 350 customers per week.
With a steady stream of customers, ZEAL-NET Cybercafé was raking in between N1,500 and N3,500 per day, even though daily turnover could plunge to as low as N800 per day when the server is down. On the average, however, the cybercafé was smiling to the bank with between N25,000 and N35,000 per week or N140,000 per month from day and night browsing. But the success story has since changed, and in an astonishing speed too, as the once bubbling cybercafé has closed shop, leaving sour taste in the mouths of its owner and his employees. “It wasn’t more than two months that the business did very well, we are no more in operation, we have close down”, Bayo Famuyiwa, proprietor of the cybercafé, told the magazine.
Famuyiwa is not the only cybercafé operator who got his fingers burnt trying to make a fortune riding on the once thriving cybercafé business. Samuel Olanrewaju, who set up Taykul Cybercafé in 2004, may soon fold up and his cybercafé join the growing list of dead ones in the country. Signs of the imminent collapse of Olanrewaju’s cybercafé first emerged in 2009 when it was shut for two years. The cybercafé located on Ogudu Road, Ojota, Lagos, was later reopened in February 2012, but not without some slight adjustments, including a change of service provider and a downward review of tariff to attract patronage. Olanrewaju disclosed that he had to reduce the price of his airtime from the original N150 per hour to N120 in order to attract customers.
That was not all. He also abandoned Starcomms, his Internet service provider, ISP, because of poor quality of service in favour of UN-Wired Network, another ISP where he gets services at the rate of N16,000 per month. Although, Olanrewaju’s cybercafé witnessed a marginal increase in the number of customers on account of the adjustments, recording about 30 customers per day, his survival measures may not have completely staved off an impending closure of his outfit, as patronage has since dropped to as low as 11 customers per day. The turnover from the few customers who now patronise the cybercafé is barely enough to fuel his generator, pay rent for office accommodation or even service his equipment and cover other operational costs.
Similarly, the fate of Kimsplace Enterprises, another cybercafé, also at Ogudu Road, Ojota, is also hanging in the balance despite a bonanza, which reduced the cost of airtime from N100 to N50 per hour as well as giving customers free soft drinks to enhance patronage. As Busayo Brown, owner of the cybercafé, admitted, the business has been swimming against the tide since 2000 when it was set up. She said that apart from the bonanza introduced by the outfit to woo customers, it also switched from using MTN modem, which came at the rate of N15,000 per month, to Spectranet. According to her, the change of service provider became necessary following persistent complaints by her customers over incessant outages of MTN’s network. “With all the things we did, we now have at least up to 50 customers per day” she said. However, it remains to be seen how that level of patronage would keep the outfit running.
ZEAL-NET, Taykul, and Kimsplace Enterprises are just three out of thousands of cybercafés across the country that have either disappeared from the landscape or are on the verge of doing so in the last 11 years when the Nigerian telecoms/information and communication technology, ICT, sector was deregulated. Before and shortly after the deregulation of the sector, cybercafés were common sights, dotting all nooks and crannies of major cities across the country. They served as major means of generating employments for Nigerians particularly the youths. Essentially a business centre where people pay to use the Internet via desktop computers or in few cases, laptops, cybercafés were as ubiquitous as the number of people that could afford to set them up.
Because not many people could afford the high cost of having access to the Internet, cybercafés were in high demand, as students, professionals, business executives, and even artisans, regularly patronize them. Until recently, over 15,000 cybercafés were said to be operating across the country, according to Layi Omotola, president, Association of Cybercafé and Telecentre Operators of Nigeria. More than 10,000 of them were concentrated in Lagos State alone. However, in recent times, the fortunes of the once bubbling cybercafé business have been on the reverse, with most of them closed down. A few of them are still struggling to survive. Omotola puts the current number of functional cybercafés in the country at below 600.
Stakeholders in the telecoms/ICT industry attribute the high mortality rate of cybercafés in the country to a number of factors ranging from the perennial poor quality of services by ISPs to inadequate bandwidth due to high cost, and rising cost of operations, among others. However, investigations revealed that, more than anything else, the introduction of cheaper and innovative mobile Internet services by telecoms operators put the nail in the coffin of cybercafés. For instance, with voice telephony almost saturated, affecting the profit margin of telecoms operators, data services, according to experts, naturally became the next growth opportunity for them. Subsequently, telecoms operators, already encouraged by the unified licensing regime that allow them offer a bouquet of services including voice, data and multimedia services, and also determined to open new revenue streams, flooded the market with innovative and affordable Internet services to meet the growing Internet demands of Nigerians.
As telecoms operators are rolling out cheaper and innovative mobile broadband Internet services, device makers are also churning out tonnes of Internet-enabled smartphones such that today, Nigerians irrespective of their social status can now use their smartphones or any low entry mobile phone to connect to the Internet everyday while on the go. In fact, the influx of mobile phones and other mobile devices such as BlackBerry, iPhones, iPad, and other tablets capable of browsing the Internet has changed the dynamics of Internet provisioning in Nigeria, as most Nigerians who used to patronise the cybercafés now seem not to have any reason to do so again. Many people would rather access the Internet from the comfort of their homes, offices or anywhere using their mobile phones and tablets. Even the substandard and cheaper mobile phones commonly called ‘China phones’ and second hand or cloned computers can now be used to access the Internet.
Apart from Internet-enabled mobile phones and tablets, any cheap Internet modem from any of the mobile network can be used to connect to the Internet. All the mobile network operators including Glo, MTN, Airtel, Etisalat, including Code Division Multiple Access, CDMA, operators such as Visafone, Multi-Links, and Starcomms, are tyring to outdo one another by offering an array of Internet modems that boasts mouth-watering tariff and packages to attract more customers and enhance their revenue profiles. At major roads and markets especially the popular Computer Village, Ikeja, Lagos, Abuja, Port Harcourt and other major cities, software that allows free Internet access on laptops and mobile phones are also on offer to customers. All these are raising the bar and pushing more possibilities into users’ hands much to the chagrin of cybercafé operators. The latest smartphones now have enough processing power to stream high-definition video and enough memory to download and store databases of music, photos and videos from the Internet. Some of them also come with full QWERTY keyboards to make typing and emailing a pleasure.
While cybercafé operators are trying hard to swallow the bitter pill of the changing dynamics of Internet provisioning in Nigeria, inadequate power supply by the Power Holding Company of Nigeria, PHCN, unreliable services by ISPs, incessant raids by security agencies over Internet-related frauds, increasing operational cost, and high cost of bandwidth all conspired to force many cybercafé operators out of business. The exorbitant cost of bandwidth appears to be the greatest pain in the neck of cybercafé operators. Because it is sourced from Asia, America and Europe, bandwidth is very expensive in Nigeria. For instance, a recent research by an independent Internet group in Britain revealed that ISPs in Africa lose over $400 million annually for pairing of local traffic in exchange and international bandwidth provision. The colossal loss, the research said, is incurred because most African countries (Nigeria inclusive) do not have Internet Exchange Point, IXP, where ISPs can interconnect and share local traffic.
The magazine learnt that the Nigerian Communications Commission, NCC, has since commissioned the Lagos axis of the Internet Exchange Point of Nigeria. So far, about 30 ISPs and telecoms companies have been connected into the exchange point while plans are on the way to complete and commission other IXPs in other geo-political zones of the country, according to Muhammed Rudman, chief executive officer, Internet Exchange Point of Nigeria. He explained that the IXP would bring all the operators, ISPs, and content providers under the same roof for interconnectivity so that it would lower the cost, provide more efficient routing and, at the end, cheaper and faster bandwidth to the Internet users. However, with only the Lagos IXP up and running, cost of bandwidth remains very high. Although, the cost of bandwidth has dropped in the shores of Lagos from between $3,000 and $2,000 to about $500 per megabyte, which is really significant, following the landing of various undersea cables, cost of fibre to distribute to other far-flung cities is still very high. Worst affected are the northern parts of the country where the cost of bandwidth is as high as $4,000 per megabyte.
Bayo Banjo, engineer and president of Nigeria Internet Group, NIG, told the magazine that the ultimate aim of the group is to crash the cost of bandwidth to as low as $30 per megabyte, adding that before the landing of Glo 1, Main One and more recently, the West African Cable System, cost of bandwidth was $2,000 per megabyte. Main One also assured that it could further crash the cost to below $30 if it had volume. To reduce the cost of bandwidth, Banjo argued that since Internet, technically is free, and SAT-3, owned by government, has already been amortised, government should give it at a low price.
Banjo who is also chief executive officer of Disc Communications Limited, explained: “Internet is free technically, what is the cost is the cost to bring it to you. So, when Main One, for instance, is charging money, they are virtually getting it free from the connection in Europe but they are charging you to amortise the cost of their cables that they used to bring it. SAT-3 has already been amortised so why can’t the government give it at a ridiculous low price. Then a company like Main One pays them for volume and then sells the volume at a lower rate. Once Internet is cheap you will see cybercafés, you will see Internet companies springing up all over the place and then habits will change. Most developments are stimulated by government either by policy or attitude and in some cases you have to inject money.”
Even if the cost of bandwidth crashes, the few surviving cybercafés still have to contend with high cost of operation. For instance, Famuyiwa lamented that the cost of acquiring and running a generator ate into the profits he would have made in the business. Hear him: “When we were buying fuel at N65, we were spending N1,500 on fuel daily so, imagine now that fuel is N97 one wonders how cybercafés cope, as light from PHCN now comes on for two to three hours daily. There was a particular month we made N94,000, but when we checked our records we discovered that we spent N36,650 on fuel for that same month. Staff salary was there and that was the month we thought we did better with less expenses.”
On his part, Olanrewaju spends between N1,500 and N2,000 on fuel per day, an amount he considers too high for a small-scale business like his. Apart from the ability to ensure that Internet networks are good and stable at all times, experts say that to run a cybercafé successfully and attract and retain customers, a cybercafé had to be up and running all day and night, especially where night browsing services are offered. The system must not go off because a customer would be dissatisfied if at the point of printing or sending documents for printing or at the point of downloading or opening a web page, the café administrator tells him there is no fuel and so the system has to be stopped. This means that when there is no electricity, a cybercafé runs on generator throughout the day if it hopes to keep its customers.
Besides poor power supply, Famuyiwa expressed regrets that once an ISP sweet-talks an operator into subscribing to any of its packages, the operators is immediately left on his own, as subsequent complaints over persistent downtimes and server problems are usually unattended to. Several phone calls to the ISP are usually responded with the monotonous answer: ‘we are working on it.’ While accusing ISPs of selling more bandwidth than their capacities could carry thus, causing congestion on their networks with the resultant slow download speed and downtimes for customers, he said that “in cybercafé business, a single customer’s complaints could dissuade others from patronising that particular cybercafé. However, there are views that some ISPs and other service providers are sometimes not responsible for the poor quality of service, as they too are victims of harassment and vandalism by hoodlums who cut cables and steal equipment thereby causing frequent service disruption.
While the stealing of the cables by hoodlums is going on, another type of stealing known as Internet fraud or cyber crime further put operators of cybercafés on the searchlight of various security agencies especially the police and operatives of the Economic and Financial Crimes Commission, EFCC. The police and EFCC constantly raid cybercafés to arrest suspected perpetrators of cyber crimes especially Internet fraudsters popularly called ‘Yahoo, Yahoo boys’ or ‘419ners’ in local parlance. During such raids, innocent people doing genuine business also get arrested and prosecuted alongside the criminals. Because of this, thousands of Nigerians shun the cybercafés.
Poor management or understanding of cybercafé business and absence of support infrastructures are also believed to be responsible for the high mortality rate of cybercafés. An ICT expert, for instance, points out that Cybercafe is an IT-based business, a kind of networking management that involves a good IT technician and managers to implement and run. The expert, who declined to be mentioned, said that there is need to make a good survey of the need in an area and calculate the likely expenses and income, determine the kind of ISP one can afford and at what bandwidth rate he can apply for with support to the number of computers. The expert also suggested that a cybercafé operator should also combine business and game centre and a computer-training centre to his operations to increase his revenue base. Expanding the business would ensure that those who require printing, binding, copying, faxing services would be attracted as well as those who enjoy computer games and karaoke, among others.
Famuyiwa could not agree less, noting that as grim as the picture of the future of cybercafés is, there is still light at the end of the tunnel. Hear him: “Not everybody can maintain a modem, a system and a generator at home. GSM users are doing so little while browsing on their mobile phone; if you are the business type you still need a desktop or laptop at home and if you cannot afford these you still need to go to a cybercafé to work online.” He said, for instance, that candidates for the Joint Admission and Matriculation Board, West African Examinations Council, and other professional examinations, still need the services of cybercafés for online registration and other related business activities. This is true considering the fact that not everybody who owns a laptop, phone or an Internet modem has a spiral binding machine, photocopy machine, ink or toner and scanner in one place.
Apart from the need for operators of cybercafés to change their business model, Rudman suggests that one of the long-term strategies to save the dying cybercafés is for government to get involved and come up with initiatives to ensure that bandwidth reaches the nooks and crannies of the country. He puts it thus: “government needs to wake up and find ways to take fibre across the country at reasonable rate because the cost of fibre between Lagos and Abuja, for instance, is currently expensive. The cost of fibre between Lagos to Kano is more expensive than between Lagos to London. So, unless government wakes up and discusses with all the carriers to buy the capacity from them and give it to users at subsidised rate, it is going to be difficult in the near future to see a deep drop in the cost of bandwidth in Nigeria.” However, it remains to be seen how government responds to calls for improved infrastructure and operators of cybercafés change their business model in line with current realities. What is clear, however, is that until and unless this is done, the casualty figure of cybercafés would continue to rise.
Additional reports by Abiola Odutola, Temitope Adeogun, Peace Arikpo, and Ajibola Ajisafe