USA OLPC Sales Subsidy for $100 Laptops Elsewhere?

   
   
   
   
   

No one at OLPC News was surprised when One Laptop Per Child finally admitted that a $100 laptop price was still just dream, and OLPC XO's would be $175 in the initial shipments. The price of their Children's Machine had been slowly escalating from $130, to $150, and then with the BTest-3 hardware upgrade, to $175.

olpc ebay sales

But now Nicholas Negroponte is reaching for the "$100 laptop" dream yet again, this time through direct subsidy. In a follow-up to yesterday's announcement that Carlos Slim was supporting the program, Negroponte is now talking subsidy schemes:

You told me you are working on a subsidy scheme. Can you elaborate?
"I cannot discuss the details, for obvious reasons. As you know, the current cost is $175. One way to get this to the poorest countries, and maybe even reward some of the early adopters, is to subsidize $75 each. This is my aspiration. It may become a reality in the coming days."
As Charbax calculates, if Carlos Slim Helú gave 2% of his fortune for an OLPC Mexico or Latin America, that would be $1 Billion dollars or 5.7 million laptops at $175 a computer, the whole first shipment of X0's and then some. Now if he donated only $75 per laptop, bringing the price of OLPC XO's to the fabled $100 laptop price point, he could sponsor 13.3 million computers - enough for the first few years of production.

Carols Slim might not be that generous of a guy. He didn't amass his fortune by giving money away willy-nilly. But there is a whole other wellspring of wealth, donations, direct subsidies that could work. One that's been mentioned since day one of the OLPC program: USA sales subsidizing developing world government purchases. Negroponte has hinted at USA sales yet dismissed others efforts to stimulate demand. So it does come as a surprise that now he's talking specifics:

Are you actively selling the XO Laptop in the United States?
"We have engaged Eleven Inc. to help us. Actually engaged them two months ago knowing this might happen. We are in discussion with many people."

What do you mean by "many people"?
"Last time I counted, 19 governors had contacted OLPC. We have done very little in the USA. When I say I am talking to many people, it has been on the supply side, the Apples, Googles and Dells."

I don't know much about Eleven Inc. except what I learned from a quick look at their Web site. They appear to be an advertising and marketing firm in San Francisco. What are they doing to help you sell the XO in the U.S?
"They have been helping us explore aspects of the XO that we are not touching, from commercial to US school sales. Keeping in mind that two of their clients are Google and Apple, it is not surprising to have mutual interests. Just because we do not do something - like attend to the commercial aspects of the XO - does not mean the best in class should not be looking at it. So they have been helping and made a presentation to our Board last week."

olpc ebay sales

This sounds like the continuation of the now-old theme of a high-priced XO in America, with the difference donated to the OLPC Foundation, a 501(c)(3) charity. Those donations pooled to subsidize laptop purchases by poorer participating countries.

The real question then arises as the price differential between here and there. If it's significant, more than $50 or $100 say, we might just see OLPC's on eBay anyway - X0's re-imported from $100 laptop countries to this one.

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14 Comments

If I remember well, subsidies by NGOs and other development organizations was planned from the start. Mostly by financing the development costs itself. It was clear from the start that many eligible countries would never be able to finance them from their own budget. So these countries could ask their customary donors for help.

http://wiki.laptop.org/go/Our_market

Example of a blog mentioning NGOs in January 2006
http://knowsomethingcool.blogspot.com/2006/01/update-100-laptop-gets-cranking.html

What has become clear now, is that the OLPC is the only option left. I interpret Intel's Classmate production anouncement as telling the world that they will abandon the Classmate if the OLPC fails.

"In an unsurprising move, Intel has now committed to go toe-to-toe with One Laptop One Child's production schedule."

http://www.olpcnews.com/sales_talk/donors/olpc_osx_subsidized_latin_america.html

So it seems it will be the XO or nothing.

Winter

Negroponte has said that he is selling in the US as a way of countering Intell's push elsewhere.

"But he has a response: "What can we do that Intel can't? And the answer is - launch in this country." Intel couldn't sell the Classmate here, Negroponte reasons, for fear of alienating its customers like Dell (Charts, Fortune 500) and Hewlett-Packard (Charts, Fortune 500), who do the marketing in the classic PC industry ecosystem. Selling in the United States could help get volumes up and thus costs and prices down, as well as strengthen support for the XO and attract more programmers to it, he says. OLPC eschews profit on the XO."

http://money.cnn.com/2007/04/27/technology/fastforward_xo.fortune/index.htm

To the other Eduardo,
thanks for your link. The strategies become more clear now. There are four boxers in the ring. OLPC and Intel offer hardware and fight each other hard about launch sales. Redhat and Microsoft deliver software and try to be on board of both hardware platforms. MS is going to try to sell SD-cards for a few bucks from which the XOs can optionally boot XP in beside the installed Linux. OLPC supports that because XP acts as a protection for the target countries' investment in the XOs for the case that Linux/Sugar is not successful. The acceptance of the XOs will be better if XP runs on it and is available cheap.

The hardware fight about the launch market share is destructive. On the other hand the software strategies are symbiotic because both HW and SW sides benefit from each other in the short term. In the long term the better software on the better hardware will win. The real winners in any case are the target countries since they really get a choice and a stronger position for negotiations and now some subsidies for both hardware platforms. The game gets more interesting every day!

The OLPC foundation filed lots of patents, specifically around the technologies of the dual-mode low cost screen, Wi-Fi Mesh, the power managment using the DCON chip to turn off the main processor most of the time and lots of other technologies. Even though the whole project is open source, it's for sure that Dell, Apple, HP, Wall-Mart, Asus, Acer, Google and other IT giants have R&D teams browsing the hardware and software details daily at http://wiki.laptop.org and for sure that boards of of the large IT companies that don't all necessarilly have a special interest in keeping the Wintel monopoly on PCs, all those other giants certainly must be thinking seriously about using some of this technology on future commercial products.

Probably that Dell could launch a commercial low cost laptop for adults using some of the same technologies, and since the OLPC foundation has the patents, since Dell would probably like to use some of these innovations for commercial use, Dell can thus pay licencing fees to OLPC towards subsidizing the manufacturing of the laptops that are targeted for the children's education in the countries.

The question is how soon will commercial deals be put in place, if those will be announced before or after the start of the mass production of the XO-1 laptops this September.

I see it like this, a commercial product could come with a larger screen using the same dual-mode low power and low cost technology, a full sized keyboard, a removable hard disk drive slot (of the iVDR type) and HSDPA or WiMax built-in. This one could become available commercially all over the world or at least be announced by the end of the year and availéable for less than 300$ at retail, and a good part of that would go to subsidize the OLPC foundations manufacturing processes.

About the philanthropy of big fortunes or IT giants contributing to OLPC, I'd say that if someone was to donate 1 billion $, at that point probably that it would allow the cost to go down towards 100$ a laptop, thus 1 billion $ in philanthropic donation to this project, would not be all spent in production during the first month, thus it equals to the production and delivery of 10 million laptops into the hands of the children.

Sergey and Larry have a fortune of 16 billion $ worth of Google stock each. They could also each donate eigther 3% of their fortune personally, or such a company as Google could decide to spend money of the company, which could possibly be part of their marketing or R&D, where for example each of the 10 million laptops could have a Google logo onto them. Thus the argument towards investors would be that this would be a longer term marketing strategy towards the emerging markets, thus branding of the OLPC laptops, why not.

If the project proves it's educationnal and economical success, for any large company, it might be all of it worth to give the laptop in exchange for the branding. Nike, Coca-Cola or whatever giants, not only americans, as soon as the concept is provent to work, the sponsoring of laptops to all the worlds children could happen in no time. Governments can do it and large coorporations could too.

"If the project proves it's educationnal and economical success, for any large company, it might be all of it worth to give the laptop in exchange for the branding. Nike, Coca-Cola or whatever giants, not only americans, as soon as the concept is provent to work, the sponsoring of laptops to all the worlds children could happen in no time."

The only problem is that corporations will not risk billions on dollars until they see the XO's success. It's kind of a catch-22 situation.

Nicholas

Some countries have made less than good experiences with US foreign policies of the recent years and might therefore not be particularly fond of having symbols of the US economy on devices that eventually become omnipresent in their countries. In some places it might even provoke violence against laptops carrying those logos. But you could easily think of this idea with logos of other companies in the world that are not mistaken for US symbols like Nokia, Nestle, Addidas etc.

Yes there would be enough brands internationaly to satisfy any developping or third world country for whome a 100 million dollar investment is much. Or for countries that might have a problem justifying to use state money to pay for these even though they would be proven to be a very usefull tool for education.

Though there can be an ethical problem in allowing certain brands to sponsor this tool for childrens education, it just depends on which country we are talking about. Wealth is present all over the world, it just needs to be somewhat redistributed more evenly.

The war in Iraq the past 5 years has cost to USA the same amount of money needed to buy a 100$ laptop and provide free wireless broadband Internet to every single person on the planet. So this is just about doing another war, but this time it's against world poverty and digital divide, and this time USA does not have to pay for and fight the whole war by itself.

"The question is how soon will commercial deals be put in place..."

Pretty soon I think:

"Quanta Computer, the world’s largest manufacturer of notebook computers, will start making ultra-low-cost computers that could be sold in developed markets for as little as $200 this year or the next, according to its president.
..."

http://www.ft.com/cms/s/6d086a62-dcb3-11db-a21d-000b5df10621.html

I think the OLPC project is in very bad shape if the only hope is to get subsidies that will help participating countries make the initial purchase. Given that $175 is only a fraction of the total cost of ownership, I don't see how it would be possible for those countries to implement the new technology in a successful manner.

It doesn't look good and there are no easy answers.

Charbax' post made me wonder: how it is possible that Negroponte's giant corporate friends, like Google, don't seem to see much value in his enterprise?

To me, it is all a big puzzle.

Pablo

Pablo,
hasn't Google agreed to host the e-mail and web storage accounts for all kids? I would call that a pretty strong engagement if 10 to 100 million kids or even more could be involved. Of course there is a business interest behind that. But so is with AMD, Redhat, and all industrial partners of OLPC.

Roland,

I'm not Pablo, but I wanted to point out that there is no official commitment (agreement) from Google, as I mentioned in this blog a few days ago. So, we don't know, at this point, if the "Google storage" is true or not or what the "conditions" might be.

Take a look at the GMail terms of use:

http://mail.google.com/mail/help/intl/en/terms_of_use.html


*************************
#2. Personal Use. The Service is made available to you for your personal use only. Due to the Children's Online Privacy Protection Act of 1998 (which is available at http://www.ftc.gov/ogc/coppa1.htm), you must be at least thirteen (13) years of age to use this Service.
***************************

That clause alone would eliminate virtually every child using the laptop.

And there's more: Google serves advertisements to account holders. how will that affect children? Who will monitor the ads content?

As anyone can see, there is still a lot of open questions.

On Google.

This is from Walter Bender
http://www.olpctalks.com/walter_bender/walter_bender_olpc_meeting.html

"Questioner 3: How long does that journal last for? [..]

Presenter: So what we have behind the scenes is the differential filestore, and the differential filestore is automatically backed up to the school server. And so any time a kid comes to school, everything's backed up and then from there it's backed up to Google, and so there's this transparent flow. And the kids have some sense of affinity. "

This is evidently NOT Gmail. It also sounds like they did have some communications with Google.

However, Google should have permission from the respective governments. Ethical rules will trump everything, so I expect there will be little or no adds. If Google fails the children, it will kill them.

We will have to wait until some concrete plans are published.

Winter

Sorry, it IS marketted as Gmail.

Winter

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