Cabina Fever - Red Cientifica Peruana - Brief Article
Latin Trade, June, 2000 by Sally Bowen
Red Cientifica Peruana brings the Internet to 'everyone.'
RED CIENTIFICA PERUANA (RCP), PERU'S MOST POPULAR INTERNET service provider, has come a long way since its beginnings as a nonprofit company. With a hefty infusion of foreign capital, the company is launching a joint venture aimed at making money across the Americas.
"It's a huge leap forward--and quite a scary one: says Jose Soriano, 52, Red Cientifica's founder and current CEO of Red Uno, the new venture established with New York-based investment fund Westsphere. "RCP has grown in nine years from a tiny, non-governmental organization-type set-up with one computer and three modems to a Internet service provider worth US$200 million."
Red Cientifica's growth--$6 million in revenues last year--stems from its pioneering use of public cabinas, or booths with computers that are rented for fees ranging from $1.50 an hour to $15 a month. Soriano believes cabinas represent 70% of Peru's current Internet use.
From its inception in 1991, RCP ran on a cooperative basis. All participants co-financed equipment and had equal rights. Within a year, the nonprofit group had nearly 100 partner institutions and 1,000 users. By 1996, those figures had spiraled more than tenfold.
Public rentals have become so popular an idea that scores of smaller companies, which Soriano calls salvajes, are copying the concept in Lima and in outlying provinces. The father of Peru's Internet, as Soriano is known, estimates there are now some 600 such companies throughout the country, of which 120 are operated by the RCP.
Hundreds of thousands of Peruvians without a home computer now surf the World Wide Web or check e-mail. It is a perfect solution for a nation where the per capita income is $2,000 and most of its 25 million inhabitants don't have a telephone.
"And it's cheaper than using the telephone," says Jaina de la Torre, a middle-aged housewife from the Lima suburb of San Isidro who uses cabinas to communicate by e-mail with a daughter living in Houston. "This is the third time I have been here today."
After years of continuous growth and innovation, RCP took the corporate plunge last December after New York-based Westsphere agreed to invest $30 million to create Red Uno. It is Westsphere's first Internet investment, although it has a wide portfolio in Latin America with interests ranging from entertainment to soft-drink bottlers.
"The $30 million is just the beginning," explains Soriano. "We expect to invest another $60 million within the next 12 months,"
Public web booths. Red Uno will use most of that money to roll out public rentals throughout Latin America. The company's experience and contacts have already facilitated joint ventures and strategic alliances in Argentina, Brazil, Colombia. El Salvador and Uruguay, and operations in 15 countries are expected to begin by the end of the year.
Red Uno even plans to export its public booths to the world's richest nation-- the United States. It will set up in cities with large Spanish-speaking immigrant populations. Soriano also plans to enter the electronic commerce arena.
By allying with a major bank, Soriano thinks he can provide a viable mechanism for "micro-transactions"--the purchase of small items worth maybe as little as $3.
The plan may sound bold, but Soriano has transformed services aimed at the poor into a growth business against the fast-changing background of the Internet business in Peru. Web portal Terra Networks and AT&T, among other global players, have recently arrived to expand Internet services and improve telecommunications infrastructure. Along with RCP, they are currently Peru's only three genuine Internet service providers: other companies offering Internet connections simply resell the services of one of the three.
Although Red Uno is targeting the public cabina market, it intends to compete on all fronts and is even studying the possibility of offering an initial public offering in New York this year.
"We will take on Terra and AT&T but from the standpoint of our culture, our language and our vision," says Soriano. "We refuse to recycle what is organized and imported from Miami. And that is our strength."
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