Number of Users

     As of mid-1999 there were approximately 35,000 to 40,000 registered and paying Internet subscribers, however with a ratio of 2.5 to 4.5 users per Internet subscriber account, there are, in effect, over 180,000 Internet users.  This is equivalent to 0.18% of Egypt’s 66 million citizens having access to the Internet.  (El-Nawawy, 1999) Although the overall Internet population is small, the growth in the number of actual users has been impressive - during the internet’s first year of operation, there was an estimated 2000 users, with over seventy percent of this number represented by the academic sector. (Kamel,T.  3)

Number of Subdomains

    The current number of registered commercial and individual subdomains is equal to 1090. (El-Nawawy, 1999)

Number of Internet Service Providers

     From the initial 12 ISPs established after the declaration an “Open Door” Policy (1996) with regard to Internet provision, the number had more than quadrupled to over 50 by 1999. (El-Nawawy, 1999)  As these numbers suggest, this service has proven to be one of the most aggressive and successful of the liberalized communications activities, particularly in light of the limited number of paying users.

Deterrents to Internet Growth

     While the above figures demonstrate remarkable growth over a short period of time (five years), the percentage of Internet users to the overall population indicates a huge untapped user base that has yet to be reached.  Obstacles to further Internet dissemination are discussed below:

Pricing Structure – Internet Specific

    The most obvious issue in the acquisition of any service, is the upfront cost of both acquiring the initial equipment and the reoccuring cost of the service.  The following table attempts to summarize these issues with respect to the Internet and IT via comparison of costs in Egypt to developed countries:  (El-Nawawy, 1999)
 

Item	Cost
Individual Spending on IT	Individual spending on IT in Egypt is $5/year, while is $995/year in Switzerland. Individual income in Egypt = $1100/year while in Switzerland = $20K Hence, Egyptians spend 0.5% on technology, whereas Swiss spend 5%, from their individual income, that of the Swiss being 20X that of the Egyptian.
Hosting Cost & Price/Performance	Egypt=$60      USA=$25 Taking into consideration the average income, this figure is costly for an Egyptian.  Additionally, the price/performance is very slow. This is an added (time) cost in itself.
Website Design and Implementation	Cost ranges from $500 to $35,000, the minimum cost still being too expensive.
Internet Access	20$/month in Egypt. $10/month in U.S.
Computers	Adjusting for relative wage rates, a computer in developing countries is approximately 5-10 times more expensive than in the USA

     It is primarily the last two categories that are barriers to entry for the end user.  Without a sizeable initial investment in hardware (remembering a GDP of $2,850 per capita), access to the Internet (at twice the comparative US rate) is precluded.  Thus, an entire segment of possible Internet users are eliminated at the initial step. A quick remedy for this scenario was the creation of “Cyber Cafes” in Egypt’s major metropolitan areas.  This investment/price hurdle limits the number of Internet users, that in turn limits the size of the Internet market space for e-commerce.   Lacking a significant lucrative market segment, the private sector limits Internet and e-commerce investments that could possibly assist in overcoming the initial investment/price hurdle.

Pricing Structure – Circuit Specific

     A major factor in the Internet access cost being twice the comparative US average, despite active competition is the connectivity cost that the ISPs must pay to the monopoly provider – Egypt Telecom.  Beyond the ultimate impact on access charges, the high cost of leased circuits impacts the use patterns of end users in that e-mail is preferred over Web browsing because of the associated bandwidth requirements of the latter.  This in turn has negative ramifications on e-commerce development.

     International connectivity is also negatively impacted by particularly high rates - leased circuits to other countries carry an Egypt Telecom surcharge than can be two to three times the cost of the leased line itself.  In an interview conducted for the Harvard study, the Managing Director of one multinational firm, Egypt Telecom anticipates losing significant revenue in the future Internet-connected market and is trying to make their money while they can. As an example, another interviewee had just installed a T1 level service for their users at the cost of 800,000 USD per annum. Similar service in the United States would cost in the range of $12,000-14,000.  (Harvard)
 

    The most glaring case of this sort of pricing inhibiting an entire industry is that of the software sector.  The advantage of having a low-wage, highly trained software resource is totally negated by the high cost of international firms attempting to conduct standard software and information exchange communications.  The Harvard study, in ranking Egypt’s communications on high performance and low cost service on a scale of 1-10, gave the service a 1-2.  (Harvard)