Scope of the research

In order to narrow down the research to manageable proportions, it was decided to limit the scope of this research to three important areas of investigation:

1. The preferences and demographic characteristics of the Internet café users that make up the —retail? portion of the market.

2. The impact of business scale on viability.

3. The impact of utilization levels on viability.  That is, the degree to which the capacity of the equipment and connectivity are used to generate revenue.

Specific questions

User Demographics

The technology providing connectivity is fairly well proven, but comes at a price, so any successful business model needs to generate strong revenue streams.  Utilization levels are critical for a business to be viable.  It is important to know, therefore, WHERE the model might work.  If it is possible to understand the demographic characteristics of the typical users, it is also possible to determine what kind of locations will provide a suitably large population of the right demographic groups. If we discover that the proposed model works in a city of half a million people - would it work in a town of 20,000? 

So the first detailed research question is this: What is the demographic profile of the user population?

How is the Internet used?

For profitability, a business needs to establish and sustain a high utilization rate.  This means that the bandwidth that has been purchased needs to be producing revenue as much of the time as possible.  The spread of usage throughout each 24 hour period is important.  

The second question is therefore: What levels of utilization are being achieved in practice?

It is also important to understand what motivates Internet usage. Is it likely to result in further economic growth or is it mainly leisure use? (priority or discretionary spend - this may signal the business' ability to weather any economic downturns.)  

Closely linked to these questions is the need to understand what applications are preferred.  This has an impact on the bandwidth consumed, and therefore the number of revenue producing users that can be supported at a given time.  Indeed, the ability of the business to provide the whole ambiance and experience that customers prefer is critical to its competitive advantage.   

The third question is: What are customers’ usage patterns and preferences?

Financial performance

How does the Supernet business actually perform?  Are they measuring the right things on the right basis to determine if the business is long-term profitable or not?

The fourth question: Is the case study business financially viable? 

Specific Case Study

In order to be able have access to sufficient detailed information, a specific business needed to be case studied.  The hospitality and access provided by

Supernet Internet in Aceh province, Indonesia are gratefully acknowledged and made this study possible.

A brief outline of the Supernet Internet business is given here.  A more detailed account is given in appendix G.

Aceh was possibly the worst hit province in the Asian tsunami of December 2004.  In the study location, perhaps as much as half of the city was wiped out – people, buildings, infrastructure – everything.

A small charitable organization called was set up in 1991 in Aceh and had long been involved in economic development projects.  In the post-tsunami period, a number of additional businesses were established to help speed the rehabilitation of the survivors.

SUPERNET Internet was formed in November 2005 by the principals of the charity as a for-profit business, to provide commercial Wireless Internet links to a number of organizations in the city and an Internet café for use by the general public.  The start-up was funded by a loan.  One expatriate manager was employed to oversee the start-up of the business and the remaining Indonesian staff were seconded from the charity.  Bandwidth for the business was provided over the Telstar 10 satellite connecting via a teleport in Germany and dedicated high speed link to Atlanta, Georgia where the egress point onto the Internet was located.  Consistent with the proposed business model, the plan was to re-sell about half of the purchased bandwidth to other organizations around the city, and use the other half for a twelve place Internet café, which would be open fourteen hours a day, seven days a week.  

When the SUPERNET Internet café opened, it was almost instantly very popular.  It went to 24 hour operations and opened a second venue within three months.  The number of places increased to thirty between the two sites.

The author was involved in the design of the business model, detailed business plan development and the supply and on site installation of the communications equipment and connectivity in November 2005.  The research was conducted on site in May 2006.

Choice and justification of research methodology

The starting point for each of the specific questions stated above is different. In most cases the questions are designed to test hypotheses which have been formed from initial conclusions based on previous observation or learning. Kolb (1984) refers to this as deductive learning.

This research is also characterized by the fact that most (but not all) of the information sought is objective and quantitative.  The exception is in the important area of customer preferences.  Here, subjective and qualitative data is being collected.

Part A:  User Demographics

Obtaining information about the users of the Internet café necessitated that they be asked for this information.  This could either be done verbally by a researcher or via a written survey. Some questions were designed to be similar to other published surveys so that results could be compared. (e.g. Hargittai,

2003; Kolko, Wei and Spyridakis, 2003; Pew Internet and American Life Project, 2006)

There were a number of constraints that affected the choice of methodology:

Since mainly quantitative data were being sought, it was decided to use a self-administered multi-choice questionnaire. 

Originally, the plan was to have two groups surveyed: users at the SUPERNET Internet café and a randomly selected group of the general public, as a control sample.  

Part B: Utilization

The research into utilization fell into two areas:

• The preferences of the users in terms of the application they use and the kind of Internet sites they visit.
• The efficiency of utilization of the equipment and bandwidth.

It was originally thought that the user preference information could also be obtained through the questionnaire.  A later section will discuss the outcome of that approach.

The efficiency of utilization was measured directly by a Mikrotik bandwidth management router on the network.  This recorded actual upstream and down-stream bandwidth utilization at 5 minute intervals.

Part C: Financial Results

Access was given to externally audited Profit and Loss statements for the first six months of operation of SUPERNET.  

The objective here was to be able to build a business plan based on real costs and revenues, in order to be able to determine the financial viability of the business.

References:

HARGITTAI, E. (2003) The Digital Divide and What to Do About It [online] Lastaccessed on 9/16/2006 at

http://www.eszter.com/research/pubs/hargittai-digitaldivide.pdf

KOLB, D.A. (1984) Experiential learning: experience as the source of learning and development. Prentice Hall. Upper Saddle River, NJ.

KOLKO, B.E., WEI, C.Y. AND SPYRIDAKIS, J.H (2003) Internet Use in Uzbekistan: Developing a Methodology for Tracking Information Technology Im-

plementation Success Information Technology and International Development 1 (2), 1-19

PEW INTERNET & AMERICAN LIFE PROJECT (2006) Demographics of Internet Users [online] Last accessed on 8/2/2006 at URL:

http://www.pewinternet.org/trends/User_Demo_4.26.06.htm