One Qaddafi Conundrum Per Laptop Purchase

   
   
   
   
   
olpc Libya
Muammar al-Qaddafi

Oh how times have changed for OLPC Libya. It was but a year ago that One Laptop Per Child celebrated signing a MOU with Libya for 1.2 million XO-1 computers, one server per school, a team of technical advisers to help set up the system, satellite internet service and other infrastructure for $250 million dollars.

It was but six months ago that Nicholas Negroponte revealed that the Gaddafi Foundation had cut its order to 500,000, possibly delaying the launch altogether. And today we've leaned that while OLPC has yet to ship a single Children's Machine to Libya, Intel is already equipping one Classmate PC per Libyan child:

Intel Corp and Microsoft Corp are supplying Libya's government with 150,000 rugged laptop computers that cost $200 to build and are designed to meet the needs of children in developing countries.

Intel spokeswoman Agnes Kwan said in an interview on Tuesday night that Libya's education ministry ordered the equipment in August and shipments began last month.
"So far it's going well. We're just a month into the deployment," Kwan told Reuters

olpc classmate
Classmate over OLPC XO?
This announcement doesn't mean the end of OLPC Libya, we need not to live by the "Tyranny of the Or". In fact, Intel vs. OLPC can be a beneficial laptop competition.

Of course to be a fair competition, both Intel and OLPC need to be frank about the cost of their laptops. The OLPC XO is $200, as the Uruguayan RFP and even their own website shows. Intel is also talking $200 dollars per laptop too, and maybe as a direct response to Charbax, is adamant that it’s a non-subsidized cost:

Kwan said that Intel and Microsoft are not subsidizing the price of the laptops, which Intel sells under the Classmate PC brand. She did not disclose how much the Libyan education ministry is paying for them.
Yet before you jump on either company as better or worse than another, do remember who will be the real winners of this competition: children and education in the developing world.

No matter who sells what to whom, the bottom of the pyramid will soon have top of the line technology.

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14 Comments

Not as long as Intel is NOT planning to mass manufacture cheap laptops to replace current expensive laptops. As long as Intel and Asus does not want to canniballize their expensive products, all they will do is to ship LOW VOLUME and SLOWLY of a product that everyone knows will fail because of bad battery life, bad wireless range, bad sunlight readabillity, bad software and non existant optimisations.

Intel is shipping 50 times SMALLER VOLUME of laptops then what OLPC was trying to sell to Nigeria and Libya. Thus the countries parliament are more likely to decide to invest 50 times less money on a medium sized pilot.

All the politicians don't know, or are paid under the table not to know, is that Intel has no plans to canniballize their expensive laptops, thus Intel will always purposefully make their Classmate crappier. And anyways the Classmate is not ready, the Diamondville processor isn't going to be released before April 2008. Intel will most likely not mass produce anything before Diamondville, if that Diamondville ever does turn out to be a good processor in terms of performance at low power and low cost.

Charbax,

i think you bring up an excellent point about budgets:

"countries parliament are more likely to decide to invest 50 times less money on a medium sized pilot."

Negroponte's initial insistence on multi-hundred million dollar technology purchases by poor countries was a non-starter, as time has shown. The only way OLPC will be successful is with smaller pilots and slower rollouts. Just look at Libya or Uruguay.

Neither country is starting at the million-unit multiples of Negroponte's original dreams, but with 150,000 computers over several years, allowing the country's infrastructure (budgetary, educational, and cultural) to absorb the change.

Just maybe lower volumes of computers introduced more slowly is the right way to implement one-to-one computing.

You can be sure that Intel is selling those at a loss. Why wouldn't they disclose the details of the deals in question (such as amount of money the politicians were corrupted with) otherwise.

15 thousand laptops at +200 dollar loss each is only 2 million dollars of a loss to Intel. That's just peanuts for Intel.

Probably that Libya isn't going to receive large amounts before that a Classmate is made with the Diamondville processor which isn't even available before April of next year.

OLPC needs to be mass produced now. There is absolutely no reason not to mass produce the XO-1 in quantities of millions, as long as they have fixed the resume/standby hardware bug. Every week that passes by, it's millions of children whose lives are being ruined by getting bad education.

The only reason to consider waiting is to get WiMax built-in, but even for that, one could later expand existing XO-1 with USB WiMax dongles.

Charbax,

There are several hundred million reasons not to mass produce the XO-1 in quantities of millions. Each reason is called "one dollar" and right now there isn't a strong enough rational for governments to spend those millions of dollars on OLPC.

While you may think children's lives are being ruined by bad education, there are a few people, usually called "teachers" or "educators" who may disagree. Convince them that the XO-1 is faster, better, cheaper than other options and Negroponte' dream will be aq reality. Until then, it will not.

Oh, this is ridiculous.

If there's a market for $200 laptops then Intel's dark machinations won't make it go away. In fact, if Intel's stalking horse computer sells out that'll be the green light for every other outfit with laptop design/manufacturing capability to rush out competing products and you can bet they won't be doing so to prevent sales of cheap laptops.

I'd be interested to know the terms of the agreement between Quanta and the OLPC Foundation and when and under what circumstances Quanta can start producing XO's for commercial sale. I can't imagine that Quanta's tied themselves up in an agreement which prevents them from pursuing the commercial possibilities of the XO.

Allen,

Quanta is already chomping at the bit to sell OLPC technology to other buyers directly:

Components suppliers for Quanta's XOs said that that Quanta appears to be exploring new markets independently by promoting the models to schools in developed countries.
http://www.olpcnews.com/countries/usa/quanta_sell_xo_laptops_olpc.html

Still, Quanta has to wait until 2008, when it will be free of OLPC sales restrictions.

Yeah, but there's more involved then just sales restrictions. Is there a royalty agreement? I don't have any way to gage the likelihood of something like that but it does seem that some sort of per-unit royalty would be a good way to fund further development.

Who owns the intellectual property rights on the display? Mary-Lou Jeppeson? As a former big cheese at Dell she certainly wouldn't have allowed such an important part of the XO's design to go unprotected. She may have assigned all rights to the OLPC Foundation. Or not.

What about exclusivity? Will Quanta be the only manufacturer of XO's into the foreseeable future? What are the terms under which other manufacturers might license the design. Subject to negotiation? Graven in stone? Would they *need* to license the design? From who? The OLPC Foundation? That'd be my guess but who knows?

Other then the display, is there any protectable content? You probably can't call your knock-offs and "XO" without permission but what's to prevent anyone with manufacturing capability from simply reverse-engineering the design and going into production, calling it the, oh, the XM or XP? Is that something the OLPC Foundation would like to see happen? Quanta?

Of course the software's protected by GPL or similar, open source licenses which come complete with organizations to defend the integrity of the license.

Ultimately, I don't think any of this stuff much matters. The realization that the technology's moved far enough to allow for the manufacture of ultra-low cost computers that aren't obsolete pieces of junk as they're packaged up for shipment seems to have taken root. This year's trickle of ULCLPC (ultra low cost laptop personal computers, sorry) models is next year's torrent and the following year's shrug.

charbox,

"As long as Intel and Asus does not want to canniballize their expensive products, all they will do is to ship LOW VOLUME and SLOWLY"

This matter of cannibalization is important. Yes, there is a big, unfullfilled market in the developing world for low-cost laptops. The problem for Intel et al is that if they manufacture those laptops, then a whole lot of people in the developing world who have been buying laptops that are far more powerful and expensive than they need will switch over to the new low-powered ones.

It is interesting to compare this with the cell phone market. The original cell phones had minimum functionality, but were still very useful. However, they were too expensive to be used on a large scale anywhere but in developing countries. As time went on and technology improved, cell phone manufacturers kept upgrading their phones and kept prices high. However, they also eventually started producing low-end phones similar in functionality to the original ones, but so cheap that they could be widely used in the developing world.

Something like that should have happened with laptops. Most people don't need more than a 400 megahertz cpu, and so laptop manufacturers should have produced both high end expensive models and also low-end, increasingly cheap ones. But they didn't, and so, unlike the case of cell phones, laptops have never been widely used in the developing world.

Why didn't they produce them? My guess it was fear of cannabalization, but also just a lack of focus. With cell phones you had telecommunication companies in the developing world that wanted to sell wireless on a large scale, and they knew they couldn't do that unless they got the cell phone manufacturers to sell cheap phones. For laptops there was no such organized campaign, and so it never happened

But now olpc has broken the taboo, and the manufacturers are forced to give the people of the developing world what they want. It should be very interesting to watch this unfold, and it is going to be all to the good of the developing world.

Just a thought, but if countries are going to deploy both the OLPC and the classmate, or the asus or any other competing x86 notebook, might it behoove OLPC/Redhat to come up with Sugar extensions to make it work on those machines? Perhaps as a separate fork to allow the XO's distributions to remain unaffected. That would put Intel in a interesting position regarding whether or not it would sell the Classmate in a completely compatible environment with OLPC's running along side. Looking ahead it also might making migrating from a non OLPC platform to the OLPC easier if the need arose at some point. Mesh networking could be added to the classmate via a pc card or usb which would allow for seemless side by side functionality and make the whole issue alot less thorny for the customers aka the schools.

Ned

Hi Wayan:
We are clear about the cost of the XO Laptop: $188.

You are confusing cost with price. The cost to manufacture and build the XO remains: $188 -- with the goal of driving it down to $100.

The price fluctuates slightly depending on how many computers are bought and where they are being shipped to. Just like when you buy a book at Amazon.com for $9.99 and then pay to have it delivered. The book "cost" to you is $9.99 and then pay to have it shipped. In fact, it's the same with any product that you buy and then have delivered.

The $200 you quote from the OLPC website is the price for our charity-donation program: Give One, Get One (of which the GiveMany program is part). That is the price of the XO laptop for North American consumers and groups who want to buy the laptop during G1G1 -- which begins on Nov. 12 and last two weeks.

Bottomline: The cost of the XO remains at $188.

From the perspective of a large donor or country government, the XO laptop costs at least $200. That's how much Uruguay is paying and that's even what Libya agreed to pay in the now-forgotten MOU.

The factory cost, not paid by anyone, is irrelevant. That is unless you can get Amazon books at publisher prices.

Eduardo. cellphones are inherently simpler gadgets then computers. They're simpler to design, simpler to manufacture. They are much easier to learn to use then a computer and the main, practically only, thing they do - communicate - is easy for anyone to understand.

Also, the U.S. provided a ready supply of perfectly functional but obsolete cellphones for developing nation consumption. That's part of what jump-started the cell phone industry in the developing world since the price of new cell phones remained out of reach to a significant part of the customer base. That's changed from what I understand. The cell phone industry is now busily designing phones specifically for the developing world market. There's a talk at www.ted.com by Jan Chipchase, principal researcher for Nokia, about the present and future of cell phones in particular, and computers by inference: http://www.ted.com/talks/view/id/190

There's also always been a market for cheap computers. It's just that it's been the haunt of marginal players. Outfits that put obsolete hardware together to make a computer considered marginal by the standards of the time.

It's the maturity of the product that determines the price in a free market.

Would anyone consider $3,000 a breakthrough price for a laptop with a 133Mhz processor and a 100 megabyte hard drive? Not today. But go back far enough, and not all that far, and it was a fantastic price. Yet you could hardly give a laptop like that away today and it's specs are laughable compared to the XO. As long as there's someone willing to pare another dollar off the *cost* and thus the price, the dreams of market leaders to control the market are just that - dreams.

Utilizing Occam's Razor - one of my favorite sharp instruments - it's just easier to believe that Intel was caught napping about the potential of the poor folks market Craig Barrett indulged himself in a bit of trash-talking while the potential of the market was determined. I'd say the result of the research is clear, Intel's on the OLPC board.

The cost of the laptop is $188 to countries. Other factors lift the price to $200 in the cases you cite.

The factory cost for the laptop is not irrelevant because it is what we charge for the XO laptop to countries interested in buying it.

George,

If we take your logic, the hypothetical "laptop cost" is $187. OLPC adds on a $1 per laptop royalty, and $12 for shipping, warranties, and other miscellaneous items that a reasonable person, like say a purchasing Minister, would expect from the vendor selling XO laptops.

Or to put it another way, the day you sell a mass of XO's for less than a $200 average price in open bidding, call me. Until then, the price AND cost of the XO is $200. Wait, better yet, call Nicholas Negroponte. He's the one who says:

"But it's very important to understand that the price of the laptop and the cost of the laptop are the same."
http://www.olpctalks.com/nicholas_negroponte/negroponte_analyst_meeting.html

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