India’s cybercafés could be headed for extinction as a nationwide clampdown in the name of anti-terrorism threatens their existence
There couldn’t have been a worse time for Ujjwal Sen’s home computer to crash: The high school student from the suburbs of Mumbai was buried in applications to U.S. universities in May. With deadlines fast approaching, a worried Sen ran to a cybercafé down the street from his home. The 10-seat café, squeezed between a grocer and a hardware store, was always the backstop when the 16-year-old’s computer went on the fritz.
Imagine Sen’s horror when he discovered that it had been replaced by a pastry shop. Worse still, three other cafés in his neighborhood had closed down as well. Finally, after trudging two miles, Sen found a café, but was granted admission after a long interrogation about his background that only satisfied the owners when he produced his student ID card. “I never imagined that cybercafés in Mumbai would disappear, or entering them would be tough,” says Sen.
His concerns aren’t unfounded. The increasingly heavy curbs on friendly neighborhood cybercafés are stunting the spread of the Internet. The crackdown comes as India is trying to increase household PC penetration, which is currently at just 2 PCs for every 100 households, says the technology trade group NASSCOM, and broadband connectivity, an abysmal 4 million connections, vs. China’s 3.2 million new connections every quarter, according to BNP Paribas. Even Vietnam, with a population of just 84 million, is signing up 120,000 new broadband users per month, according to IDC.
Café Owners Now Need Licenses
Why the crackdown? Officials in states like Maharashtra, Goa, Gujarat, and Haryana in the north believe that getting tough with cybercafés will help them nab “terrorists, hackers, pedophiles, and porn users,” says Ashish Saboo, president of the Association of Public Internet Access Providers. India has long been a target of terrorist attacks both within and beyond its borders. In May 60 people died in a deadly bomb explosion aboard a passenger train in the city of Jaipur, while another 60 were killed in an attack on the Indian embassy in Kabul on July 7.
As a result, café owners are expected to secure half a dozen licenses to keep their enterprises afloat, and users are now getting grilled by café owners for personal details. “It’s the only way to keep tabs on nefarious activities, many of which, we believe, originate from Internet cafés,” says an Internet café registration officer in Mumbai.
There are no official figures on the size of the cybercafé market in India, which has low entry barriers and is dominated by the informal sector. Saboo reckons that of the 250,000 cyber-outlets in India, only 4%, or 10,000 outlets, are organized. This includes private players like Sify and Reliance, which have a pan-Indian cybercafé presence. Most of the cafés—those ubiquitous mom-and-pop shops occupying between 100 and 300 square feet of space—are run by entrepreneurs. These cafés have survived on pirated software, charging from 25 cents to a dollar for an hour’s use. Now, however, they must register their outlets with local authorities, who ensure that they use legit Microsoft (MSFT) software for each of their terminals. This often requires them to upgrade their PCs, and those who cannot afford to comply simply shut down.
Turning Away Customers
One of the first cybercafés was set up by Dilip Chitalia opposite Churchgate rail station in downtown Mumbai over a decade ago. Chitalia, who runs a small printing and photocopying business, offered the Net as a peripheral service.
Ten years later he gets around 70 users a day who pay $1 an hour, down from $3.50 when he first opened. He turns away at least five customers a day for lack of proper proof o