Enhancing Rural Internet connectivity through an extended internet cafe business model

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ITS 2012 19th – 21st Nov. 2012, BANGKOK, THAILAND Enhancing Rural Connectivity through an Extended Internet cafés Business Models ongesit Williams, Patrick Ohemeng Gyaase and Morten Falch Aalborg University Copenhagen

Transcript of Enhancing Rural Internet connectivity through an extended internet cafe business model

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ITS 2012 19th – 21st Nov. 2012, BANGKOK, THAILAND

Enhancing Rural Connectivity through an Extended Internet cafés Business Models

Idongesit Williams, Patrick Ohemeng Gyaase and Morten FalchAalborg University Copenhagen

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OUTLINE

Introduction Method Results PPP proposition Extended Business Model Conclusion

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INTRODUCTION

• This paper explains how the internet café business model available in African cities can be extended to rural areas by means of a partnership between the public and Private sector.

• The problem is the lack of internet in rural areas as a result of those areas being commercially unviable.

• The hypothesis adopted to enable this research was based on the idea; traditional societies could transform into developed or modern societies if the process of social change followed the same pattern as that of the developed countries (see Fukuyama, 1995; Inglehart & Baker, 2000; Mark, 2009). This aligns with modernization theory.

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Hence the Internet café business model if extended to rural areas in Africa can enable penetration of internet services as experienced in Cities in Africa.

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The question?

How can the commercial unviability of rural areas be conquered to encourage Internet Café entrepreneurs to develop internet cafés in rural areas?

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METHOD

• To answer this research question, the Internet Café business model in Ghana is chosen as a case. Investigations are made into factors that encourage the development of Internet cafés in cosmopolitan areas in Accra and Sunyani. Further investigations were made to understand why the Internet Café business model does not thrive in rural areas and the availability of Internet network infrastructure in rural areas

• A mixed method approach was adopted for data collection. Data was collected via interviews, 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 Mobile Network Operators (MNOs)

• 16 questionnaire responses, 5 face-to-face interviews, 5 telephone interviews and 4 email responses.

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RESULT 1

Table 1. Present Business Model in the city

Key Partners

Internet Service Provider Hardware/Software providers Utility Service Providers Office landlord

Value Proposition Requirement

 

Telecoms / IT Network

Value Propositions Internet accessibility Internet service at low price Internet service either 16 or 24 hours a day Internet service with high/low speed

Customer Relationships Personal assistance

Customer Segments

 

Mass Market

Key Resources for Value Proposition Financial Physical (components for the cybercafé) Human

Channels

 Hand billsBannersRadio Adverts

Cost StructureFixed cost: Rent, Utility bills, ISP bills, tax, Salaries, amortization, cost of equipment 

Revenue StreamUsage fee, Subscription fee,Price is volume dependent (charged per hour) 

Osterwalder Business Model Canvas

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RESULT 2

Table 2. Reason why Internet Cafés boom in the city

Question 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

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RESULT 3

Table 3.Why the rural area is not attractive to set Up internet cafés

Question 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 6

05

10152025

SA

SA

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RESULT 4

Table 4.What incentives will make these investors develop Internet Cafés in rural areas

Question SA A I D SDTo what extend would the following influence your decision to set up Internet café 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 by government

9 8 3 3 2

Tax Incentives 7 7 3 5 3

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RESULT 5 Questions A I DOur services cover large part of rural areas 5    We provide Internet services in the rural areas 3 2  Our network infrastructure in the rural areas support high speed Internet connectivity

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There low demand for fast Internet in the rural areas 5    Cost of equipment does not make it economical to deploy fast Internet in the rural areas

5    

Deliberate public support could facilitate the deployment of high speed Internet connectivity

3 2  

There is no tax incentives for deploying fast Internet connectivity 4 1  Tax incentives would facilitate the deployment of fast Internet connectivity 3 2  

Table 5.Availability ofInternet Infrastructure in ruralAreas

There is Internet infrastructure in rural areas but not broadband. So there Is connectivity . But the cost to accessing this connectivity as seen in result 3 is high.

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PROPOSITIONS

Based on the results received it is glaring that for the internet café business model to 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 model is seen in figure 1 below

Removal of market entry barriers

Tax reduction for ISPs who deliver data rates a cheaper rate to investors in rural areas

Removal of import tariffs for CPEs

Decision of the entrepreneur to start an Internet café in rural areas

Actual development of the Internet cafe

Subsidy provision for the cost of access of the service

End user

BOO

Supply

Cheaper cost of access to service

Public

Initiative

Dem

and

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Table 6. EXTENDED BUSINESS MODEL

Key Partners

Internet Service Provider

 

Hardware/Software providers

 

Utility Service Providers

 

Office landlord

 

Network operators

 

Public sector**

Value Proposition Require

 

Telecoms / IT Network

Value Propositions

 

Internet accessibility

 

Internet service at low price

 

Internet service either 16 or 24

hours a day

 

Internet service with high/low

speed

Customer Relationships

 

Personal assistance

Customer

Segments

 

Mass MarketKey Resources for Value Proposition

 

Financial

 

Physical (components for the cybercafé)

 

Human

 

Market incentive from public sector**

Channels

 

Hand bills

Banners

Radio Adverts

E-government programmes**

Cost Structure

Fixed cost: Rent, Utility bills, ISP bills, tax, Salaries, amortization, cost of equipment

Revenue Stream

Usage fee, Subscription fee,

Price is volume dependent (charged per hour)

Limited Subsidy from the Public sector**The words highlighted red are the additions to the former business model

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CONCLUSION

• With the present cost of connectivity, economic and social situations in rural areas, it is impossible to establish the Internet café business model.

• Market incentives are needed to prop the demand and supply side in the delivery of 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-government programmes to prop demand while subsidies and regulation incentives to prop supply.

• If the BOO model of PPP is in adopted with the corresponding supply and demand incentive mechanism’s the Internet café operators are willing to extend this business model into rural areas.

• It is possible to extend the Internet café business model into rural areas.