War of the $100 laptops

Observations on the digital divide

Three years ago at the World Economic Forum in Davos, Nicholas Negroponte, co-founder of the media laboratory at the Massachusetts Institute of Technology, unveiled an inspiring vision. Give a laptop to every child in the world, and remove barriers to learning. Such a laptop would be sturdy, require little power and cost no more than $100. In three years, 150 million children in poor countries around the world would be able to leapfrog over other infrastructural barriers, he said, bridging the digital divide.

That laptop is out there. It is a sturdy little machine. It can take knocks, works on a solar panel, doesn't succumb to rain, heat or dust, and its screen is visible even in harsh sunlight. It connects to the internet using wireless technology.

Kofi Annan loved it; Google, News Corp and chip manufacturer AMD backed it. Negroponte travelled around the world telling ministries how to make computing available to children at low cost. One Laptop Per Child enthusiasts talked of orders in their millions.

But today, the OLPC project is badly off-target. The laptop costs $188 and much of its first production run of 300,000 went to US citizens in a "give one, get one" scheme, rooted in charity, not business. Most difficult for Negroponte is that he now has serious rivals.

In part, this is a measure of his success. Negroponte's evangelism has helped to create a market that did not exist in 2005. He should feel proud; instead, he is sore.

He blames Intel. The chip-making company initially criticised the project, then joined the board, before leaving it in a public spat earlier this month. Negroponte wanted Intel to stop marketing its rival laptop, Classmate, selling for $300. Intel lined up manufacturers and suppliers and, more importantly, committed clients.

Intel is ruthlessly competitive. A book by its former chairman, Andrew Grove, was titled Only the Paranoid Survive. Intel decided to take on OLPC when Negroponte's firm opted to build its laptop using the open-source operating system, Linux, powered by chips from AMD, a rival of Intel, thus breaking the WinTel duopoly (Windows operating system and Intel chips). That would have longer-term impact on that duopoly in underserved markets.

Intel, with Windows support, responded with Classmate, which sells at $300 in some markets. Nigeria and Libya, on whom Negroponte counted, defected to Classmate. OLPC doesn't have the resources to compete, nor can it slash prices because it does not yet benefit from economies of scale.

But there are other issues, including appropriateness and viability. Microsoft champions mass computing in poor countries, but believes the right tool is the cell phone, not the PC, which requires maintenance and support where there are few engineers and poor electricity. Dell questions the cost structure, saying selling a viable, robust laptop with relevant technologies at $100 is impossible.

It is hard not to sympathise with Negroponte, but capitalism works like that. Smart companies know there are fortunes to be made, even in the poorest countries. They are stripping costs, making their products and services affordable to previously neglected markets. The driver is profit, not altruism.

The result is improved lives for the poor: in Mexico, Cemex has enabled poor consumers to build better homes; western banks have begun offering Grameen-type microfinance; in India, the Tata group has launched a £1,200 car.

In a sense, Negroponte has won. Companies are vying to achieve what was considered impossible - making computing accessible to the poor. It didn't work out the way he had planned but the poor are being respected as consumers, not recipients of charity.

Who could object to that?