The Global Financial Crisis & The I-Cafés In The Philippines

Basically the mood in the i-café industry is one of denial regarding the effects of the global financial crisis that is hitting the Philippines. Many would still not believe that it would affect the industry as a whole considering the number of people who are still wanting to engage in this business. The industry players would have to realize that no matter what they think or believe in, it would still hit the industry and it would hit it hard. Indicators in the last few months since the news of the global financial crisis has been formally announced is not very promising:

1. Decreasing Markets and Sales – If you would go through the different forums of i-cafe operators like in ULOP.net and PinoyDSL Network Portal, you would see that they reported weak sales figures during the holiday season in 2008 which are very much alarming since it is this period when cafes should be making a killing. Most of reports coming in since the start of the new year are more alarming for on the average the i-cafe operators lost as much as 50% of their business as compared to the same period last year.

2. Increasing Number of Closures – Surely there are a lot of people who would still want to engage in operating an internet cafe but one must also look at the high level of mortality rate among industry players. On the average those who are engaging in this industry have an average lifespan of two years. Most of time due to the high level of competition and uneven pricing scheme the average i-cafe operator gives up after incurring a huge amount of losses in their  first year of operation. Based on the records of i-cafe associations, majority of the members that signed up three years ago have closed their internet cafes and moved on to other fields of business. Most are new players while there are some who have chosen to continue their operations, although they are having a hard time in coping with the worsening situation.

3. Affordable Hardware and DSL Services – Due to the continuing economic meltdown, computer hardware manufacturers and telephone companies are now offering their products at rock bottom prices. If in 2002 the average price of a computer unit was well above P40,000.00 now you can buy one for about P15,000.00 and the computer specs are not really that bad. DSL services were as high as P5,000.00 per month a few years ago now you could get a reasonable service for less than P700.00 per month. Worse is there are companies offering prepaid DSL services for as little as P20.00 per hour. These bring in additional competitors in the internet café market since now people could well afford to buy their own computer units and DSL services and do internet surfing at home.