The telecommunications sector is making major strides in Algeria, driven by a booming mobile telephony market and the recent issuance of a second fixed telephony license, but Internet activity in the country remains hampered by a plethora of obstacles. These range from limited bandwidth and prohibitive access fees to the very low computer penetration rates of households and businesses. With the number of individuals accessing Internet at 1.9 million, only 5.52% of the Algerian population benefits from some sort of access to the web. This number is low by all measures, including compared to at least double that rate in neighboring Morocco and Tunisia.

But like any other consumers and users around the world, the Algerians are keen to explore the cyber universe as long as access is available and at the right price. From 2004 to 2005, the number of Algerians accessing the web grew by 26.7% to 1.9 million. Though it is a small number, the strong growth is indicative of the population’s interest in the Internet. What’s missing is the critical infrastructure given the lack of investment committed to the Internet sector there.

Internet access in Algeria is essentially a youth activity and hence the fees charged by cybercafés are considered fairly high for that segment of the population. Although access prices have not increased in years, they fluctuate between a low DZD 50 per hour (70 US cents) to DZD 80 ($1.1). For most, such rates appear rather symbolic, but in a country where urban youth unemployment is above 30%, they are rather costly. Ironically, these same fees are insufficient for cybercafé owners because the costs of operating their businesses are high and so the profit margins are razor thin.

According to AAFSI, the association of cybercafé owners, young Algerians are attracted to the Internet because there is “a substantial lack of content and entertainment materials” in their real world. Internet chatting and web browsing fill an important void in entertainment. AAFSI also says that the 7,000 or so Algerian websites tend to be weak in content and so foreign sites, in particular French, tend to have a prominent position among Algeria’s youth. AAFSI and its members believe the solution resides in the development of a national strategy that would be driven by a central government policy in favor of Internet and content development.

In the business sector, the Internet has also made limited gains and security breaches are partly blamed for the resilience of business owners in not adopting the Internet. With the lack of security control, networks are quickly overcome by the deluge of viruses, spams and other nuisances that create bottlenecks, outages and freeze computer networks.

For cybercafé owners, the situation is even more complicated given the cost of phone line leasing and overhead. Hundreds such establishments opened by young entrepreneurs closed their doors shortly after they opened. The dozens of private operators have also been facing rising competition from one single company, Djaweb, the Internet subsidiary of state-owned telecom operator Algerie Telecom. Djaweb dismisses accusations of anti-competitiveness, arguing it follows the same rules than everyone else. But Djaweb has indeed become a disruptive force in the market. Its roadmap calls for the establishment of a dense cybercafé network across the country to offer access at a fraction of what is being offered today. While this bodes well for consumers, its competitors are likely to suffer if they do not follow an aggressive competitive strategy, and perhaps consolidation. Furthermore, Djaweb has been moving along the path of innovation, something private operators lack. One example is its partnered with Microsoft to develop eLearning applications.

To recap, the telecom watchdog ARPT issued a total of 108 Internet provider licenses and only 37 are currently active in theory. Ten of them represent the bulk of Internet activity in the nation.