ANDHRA PRADESH: From Tea Cafes to Cyber Cafes

Andhra Pradesh, traditionally, has been a land of agriculturists and petty traders, with no major industrial base. The state was believed to be a laid-back sort of place. It missed out on the industrialization phenomenon. It missed the bus to infotech revolution. But all those things appear to be a chapter in the history as it looks to be writing a new chapter in the Internet Revolution. 

The state today is beaming with claims that it is offering Internet access at some of the cheapest rates in the world. The

slogan running the air is that Internet access is available in the state capital, Hyderabad, at less than Re 1 per hour. The claims go to the extent of 90 paise per hour! Many feel that Internet access would become free in the next one-to-two years. But it would not be surprising, if it become free in the next six months, say some of the consultants to the ISPs. Irrespective of whether one gets Internet for free or the world’s lowest prices, a clear trend in the state is that of booming cyber cafes. Each and every nook of the city has a cyber cafe or an Internet access booth. By end November 1999, the city had close to 190 odd cyber cafes. 

One of the top chief secretaries in an adjoining state, in one of the forums, had remarked that Hyderabad is Hyperabad. Many may believe that there may be a tinge of hype, but such interpretations are far from reality. The fact is that Hyderabad today is the city housing the maximum number of cyber cafes in the country, beating Bangalore and Chennai up front. The city can be safely called Cyberabad, the city of cyber cafes. Undoubtedly, Internet surfing in the city is the cheapest across the country. While in Bangalore and Chennai the rates are anywhere between Rs 30-60 per hour of surfing, in Hyderabad it is between Rs 10-30. In areas crowded with cyber cafes, the rates are under Rs 10 or there is flexibility in the time for logging out.

Undoubtedly, the push for low-price Internet browsing has come due to the presence of a large number of ISPs in the state–there are a total of about

16 licensees. This number is second 



only to Gujarat, which has got about 25 licensees. As of end November 1999 there were more than six-seven players, excluding DoT, offering Internet access and it is expected that almost all the
16 would be operational by January 2000. This state is definitely proving a point: competition is an advantage to the end user. In fact, the competition is so stiff that the category “B” players are giving a tough fight to the first national ISP, Satyam. The reason being cited by many users and players is that the local players have got the feel of the local conditions and are targeting accordingly to win the subscribers. This is one reason as to why so many cyber cafes are sprouting in the city. They have been targeting the cafes to sell their services. They understand the fact that it is not possible for every one to afford a PC and a phone, the necessary elements, as of today, to have Internet

access, though one is today 



seeing a sea change in the consumers’ behaviour towards PC. The scene is that none wants to miss out on the Internet wave. The cyber cafes can quench the consumer’s thirst for browsing because of affordability. Agrees
J Krishnan, advisor, Satyam Infoway Ltd, “Cyber cafes are the culture in the southern states only as of now. And we have plans to provide Satyam Online cyber cafes soon in important cities”. The Transformation





This transformation of the state to grab the power of Internet, many an industrialists and domiciles of the state believe, is the result of the dynamism shown by the chief minister, Chandrababu Naidu. His vision for the state is unambiguous. He has on many an occasion said that “the future lies in IT and we are going to build a knowledge society.” Many of the industrialists and budding entrepreneurs feel that there is a friendly investment neighbourhood today. And the Chief Minister is helping them with not only the climate but also giving some valid suggestions. 

One important factor that is pushing the state towards the Internet cornerstone so fast is the psyche of the people there. This is one state where the groupthink mentality (herd mentality?) works absolutely. Whether it is agriculture or education, this trend is crystal clear. For example, when shrimp cultivation by the coastal farmers saw good yields, almost all the farmers in these districts went in for that. A similar phenomenon can be associated with quarrying and export of granite stones; a sleigh of coaching institutions; the sprout of Master of Computer Application (MCA) affiliations; the spread of ERP and Java courses; or even the people leaving to US for jobs in the IT industry. And this psyche extends to the ISP and Internet wave now.

So irrespective of whether all the

16 ISPs who have begun services in the state will survive the litmus test, it appears that the Internet wave will only get more torrential, rather than die down. The state has a natural advantage in a key element of the IT industry: manpower. Many surveys put it that, one out of four Indian software engineers in the US is a native of Andhra. Many of them, who have chosen to go overseas, want to come back home, if the right opportunities persist. In fact, these people have been a major source of inspiration.



The other hope is that several of the Andhra NRIs in USA and Europe can be wooed to invest in the state. This is being ensured by the state government bringing in transparency at the procedural levels and pushing the IT culture. The state has seen software exports from Hyderabad increasing from Rs 22 crore in 1994-95 to Rs 573 crore in 1998-99. The growth in the number of companies in Hyderabad, in relation to other places, in both absolute numbers and percentage growth, has been going up. In 1998-99, the companies registered at Hyderabad have gone by 71 percent. And other things like IT incentives policy of May 1999, the HITVEL project, a venture capital fund started by APIDC, APIIC, and SIDBI to fund Internet start-ups and other IT start-up companies, growth of IT training institutes in the state, and creation APSWAN will build further confidence. These measures are pushing AP as the state with greener pastures. Will it be over the brim?



Many of the solution providers and analysts, who have been observing the developments and commissioned studies to look at the potential for the ISPs, feel that there is a huge potential. But the success as well as the survival of the ISPs will depend on the business innovations and a clear-cut objective. Many feel that may be after a couple of years, the
number of ISPs may come down. But they contend that at least there would be 6-10 local ISPs in the long term. Even some of the ISPs themselves feel that it would be very difficult to assess the situation in the long run. But one thing every one is clear about is that they will not see any breakeven in the first five years. They are planning their investments accordingly to reach optimum marks. Most of them are looking at investments close to region of Rs 5-6 crore over a period of five years. All the more, every ISP has applied for private gateways.

If there is no hope of reaching breakeven in the first years of operation, how would the ISPs justify their business case and how would they survive? Says an ISP, “We might go the stock option route like the Satyam. What we need at this point of time is ensure

visibility, good customer satisfaction. And carefully plan the expansion and subscriber numbers.” The game is about creating the service needs. The positive thing about the ISPs in the state is that they have matured in terms of realizing the fact that there would be no permanent customers and word of mouth will play an important role and concentrate on the customer psychology. 



This might be the time of stiff competition on tariffs. Many feel that
Rs 7,500 for unlimited access for over an year etc. look too luring and impossible. But the ISPs logic is that who would access all the 24 hours for all

365 days. It is a mind block keeping the hours limit. Further more they contend that with the gateways being allowed, bandwidth would be no more an issue. Another important thing some the ISPs are contemplating is an AP ISP forum. This forum can not only help them in taking up the issues concerning them, but also educating the customers and working towards making Internet access reach smaller towns. 

With such enthusiasm around, it appears that the ISPs are going for the kill and would leverage on the emerging consumer trends, though cautiously. All this definitely is going to benefit one: the customer.