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Waiting to be Connected

brazil_popularpc.jpgAs enthusiastic as we often are about both the utility of low-cost information tools and the open-source/networking-related efforts of the Lula government in Brazil, it's important to recognize when things aren't working out the way one would wish. Failures can be more important than success when it comes to learning, as long as the same mistakes aren't repeated. A recent article from the online computer magazine C|Net entitled "Brazil's bumpy road to the low-cost PC" is important not because it describes a successful effort, but because it helps to explain why success has been elusive -- and what can be done about it.

Brazil has been trying to make and distribute a low-cost Internet-connected computer system since 1999. Earlier efforts fell prey to poor design (a system without a disk drive, just a small flash memory), political tribulations (the program was abandoned while Lula's predecessor was in office), or the simple economics of a proliferation of duties and taxes -- a PC could cost 50% more in Brazil than its equivalent in the US simply because of extra fees.

The PC Conectado ("connected PC") program started up in 2003, and rolled out its first systems earlier this year. Manufacturers would get a tax break, and users would get a PC that they could pay for over several years. However:

Only a few manufacturers applied for government approval, which came out as a "temporary provision" that the national senate had not initially endorsed. The senate recently gave its approval, so more manufacturers may apply.
Then there's the matter of pricing. The PCs still cost around $600, more than most Brazilians can afford. The $4 monthly ISP rate has proved difficult to implement because of charges associated with telephone access.
The last eight months of struggle between industry and government on Computer for Everyone also involved heated, and as yet unresolved, discussions about which kind of software should be bundled.
To obtain the tax cut, Lula initially stated that manufacturers and stores had to provide the computer with a Linux distribution--in Portuguese and user-friendly--and a whole set of free software applications, such as an office suite.
Heavily supported by Sergio Amadeu, who was until recently president of the National Institute of Information Technology, the proposal brought counterproposals from Microsoft. The Redmond, Wash.-based behemoth also began to promote Windows XP Starter Edition for Brazil.
It's not clear which way users would trend. While some say Linux does the job, others argue that, as in much of Asia, pirated versions of Windows would capture the day.

What are the lessons here?

Well, it's a good reminder that hardware costs aren't the only thing going into the final cost of a system; we've seen a similar lesson in the drive for low-cost mobile phones in the developing world, where the low price of a $20 or $30 handset is washed away by jacked up service fees and import duties. It also suggests that the PC Conectado project would have done well to get manufacturers committed before roll-out, to avoid not actually having the hardware to meet the promise.

It also shows the danger of ticking off Bill Gates. Although it's not directly stated, I have little doubt that there was some behind-the-scenes arm-twisting on the part of Microsoft towards Brazilian manufacturers, either offering sweetheart deals, bloody revenge, or both. This is not to say that PC Conectado shouldn't have been a Linux project -- Linux is entirely appropriate here, and using it was the right decision. But snubbing Gates at the World Economic Forum and bashing Microsoft in public probably motivated the Redmond giant to be even more aggressive than usual.

PC Conectado is not dead by any means, and there are still ways that the project can be a success. More cooperation with manufacturers on import duties may be needed, as well as a reduction or elimination of added taxes for Internet dialup. Success may simply be a matter of bringing the cost of the entire project down to something that Brazilians -- who make, on average, about $100/month -- feel to be affordable.

Would a $100 laptop work better? Possibly, but not if the bureaucracy made the $100 laptop a $400 laptop before it hit the shelves.


This page contains a single entry from the blog posted on November 9, 2005 1:33 PM.

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