Microsoft's Plan For The Bottom Of The Pyramid: Rent To Own

from the pay-as-you-go dept

Mon, May 22nd 2006 10:14am — Mike Masnick

It appears that both Microsoft and Intel are a little freaked out by Nicholas Negroponte's $100 computer concept. Either that, or they just can't stop reading C. K. Prahalad's The Fortune at the Bottom of the Pyramid. A while back, Intel bashed the idea, which (aha!) included AMD chips, while Microsoft suggested a better idea would just be to use mobile phones (running Windows Mobile, of course) for the same purpose. Apparently that idea wasn't catching on enough, so Microsoft has cooked up a new plan: pay-as-you-go PCs. They're basing it on the success of prepaid mobile phone plans in emerging markets, and figuring they can do the same for PCs. In this case, you get the PC, but in order to use it, you need to keep "topping up" a prepaid card, or the PC defaults back to a very limited version. If you use it enough (read: pay enough), then the PC becomes yours. Of course, all this takes to destroy this plan is for a few smart hacker kids to figure out how to get around the limited version, and people will never need to pay again. Either that, or why not just wipe out the operating system and install Linux? That's what happened the last time (bubble era) someone came up with a plan to give away free PCs supported by forced advertising.

Thank you for reading this Techdirt post. With so many things competing for everyone’s attention these days, we really appreciate you giving us your time. We work hard every day to put quality content out there for our community.

Techdirt is one of the few remaining truly independent media outlets. We do not have a giant corporation behind us, and we rely heavily on our community to support us, in an age when advertisers are increasingly uninterested in sponsoring small, independent sites — especially a site like ours that is unwilling to pull punches in its reporting and analysis.

While other websites have resorted to paywalls, registration requirements, and increasingly annoying/intrusive advertising, we have always kept Techdirt open and available to anyone. But in order to continue doing so, we need your support. We offer a variety of ways for our readers to support us, from direct donations to special subscriptions and cool merchandise — and every little bit helps. Thank you.

–The Techdirt Team

31 Comments

If you liked this post, you may also be interested in...

Reader Comments

Subscribe: RSS

View by: Time | Thread

DittoBox, 22 May 2006 @ 10:40am

Quick!
Quick, Steve get the F***ing-MoneyRake(R)(TM)(SM)(ETC.)!
[ link to this | view in chronology ]
sumguy, 22 May 2006 @ 10:46am

nice try...
but you have to committ to purchasing 800 hours of time which they claim covers the cost + interest; so I assume there is some timespan within which the hours must be purchased -- you might be able to get away with shaving a bit off the interest, but you will certainly pay for the thing.

By contrast, the ~$100 deal seems much more reasonable to me
[ link to this | view in chronology ]
Wolfger, 22 May 2006 @ 11:46am

Blue $$$ of Death?
So, when Windows crashes in the middle of something, and costs you and hour or more of productivity, do you get that time refunded?
[ link to this | view in chronology ]
Junyo, 22 May 2006 @ 11:46am

I don't know... In Haiti (as an example), $100 represents better than 20% of the average household income. Notwithstanding Negroponte's plan to sell to governments, they can't sqeeze blood from a stone, so w/o massive foreign aid, it's a pipe dream. On the other hand, people in Haiti often buy stuff they need in discrete parcels, increasing the total cost of ownership, but allowing the individual or family to buy/own stuff they normally couldn't afford. For instance, when my sister was over there she witnessed people buying bread by the slice because they couldn't afford the loaf. Not the most efficient way to make the purchase long term, but it's better than going hungry. I can see a family of a group of people sharing a unit and using it/paying for it on their own as capital became available, rather than a) wait for whatever tinpot dictator is ruining their country to actually use his foreign aid to give them computers, or b)waiting until they'd saved enough to buy a full fledged PC outright. The question is, are there applications with a sufficient and apparent ROI for these machines in the part(s) of the world where they're practical?
[ link to this | view in chronology ]
- sumguy, 22 May 2006 @ 11:52am
  
  Re:
  what makes you think the per/hour price is going to be anymore affordable ? could be but may not; what would make more sense would be a microloan for the negroponte laptop that would feature a much better interest rate.
  [ link to this | view in chronology ]
  - Gunjin, 22 May 2006 @ 1:00pm
    
    Re: Re:
    Pre Paid cellphones are hugely expensive as well. However, because the providers nickel and dime you to death, most customers never notice.
    [ link to this | view in chronology ]
    - sumguy, 22 May 2006 @ 3:39pm
      
      Re: Re: Re:
      s/most customers/most customers in non-3rd world countries/
      [ link to this | view in chronology ]
- Anonymous Coward, 22 May 2006 @ 12:03pm
  
  Re:
  Bread is not a computer. Food is essential, computers aren't. Your analogy is way out there. You can't compare a necessity in a 3rd world country with a commodity in a developed country. Back to the topic, it would be very inconvenient to pay in long terms a product that becomes obsolete in a lesser amount of time. I seriously think the people at Microsoft are barking up the wrong tree with this idea. And as someone previously mentioned, Microsoft has obviously not understood that there are a lot of people out there that don't like what it does, or the policies they implement, and will therefore try everything they can to bypass any protection they introduce. But really, who cares? Microsoft has enough money to fall and get back up. Why not?
  [ link to this | view in chronology ]
anonymous coward, 22 May 2006 @ 11:54am

yeah, this works because PeoplePC.com was such a HUGE success!
[ link to this | view in chronology ]
Junyo, 22 May 2006 @ 12:16pm

what makes you think the per/hour price is going to be anymore affordable ?

Um, simple math. The Negroponte machine has a fixed, known cost to acquire; $100. Unless somebody ponies up a hundred bucks, you got nothing. The MS plan, as I understand it, is a pay as you go plan subsidized by an ISP or a telco, with the user putting down a downpayment, then paying off the balance in access fees. In which case, they could statrt depolying this tomorrow with $400 Dells with a cheaper initial cost than Negroponte. And assuming that the subsidizing company took a longer view, they could potentially subsidize the whole nugget, making the initial cost nothing, in exchange for exorbitant access fees and/or a longer contract, which stiil would make sense in some circumstances. A microloan is the same concept with rearranged principals and hardware; it's all just moving the startup costs, which is the primary hurdle. And comparing it to PeoplePC isn't exactly valid, since even the poorest people in the US have much better access to capital; it's pretty widely known that once you get to a pricepoint of couple hundred bucks in the US it becomes affordable. PeoplePC had the misfortune of running into Dell. But on bigger ticket items, I refer you to Rent-A-Center, et al. Same concept.
[ link to this | view in chronology ]
- sumguy, 22 May 2006 @ 12:37pm
  
  Re:
  yeah, but the microloan for negroponte's device would be for only ~$100, not ~$400. Let's also not forget that the negroponte device comes with more cost savings in terms of power consumption and networking capabilties. Besides, your talk of a 3rd world ISP/telco subsidizing computing costs for the destitute is almost laughable. This scheme makes more sense in the US, surely - but not as much sense as used/recycled PCs.
  [ link to this | view in chronology ]
mr anon, 22 May 2006 @ 12:19pm

so my suggestion is that the end user first claims that the pc was stolen, then formats the drive and installs a pirated copy of windows..

free computer...
[ link to this | view in chronology ]
- sumguy, 22 May 2006 @ 12:39pm
  
  Re:
  now that's an idea....
  [ link to this | view in chronology ]
Hairball, 22 May 2006 @ 12:21pm

Bad Ideas are Irrelavent
When you've got a bagillion dollars, really stupid, awful ideas like this one don't matter. People like my parents would do it because M$ builds computers, Dell (a subsidiary os M$) sells them for super cheap, and Yahoo! is the whole internet. Yes. people like this still exist.
[ link to this | view in chronology ]
Junyo, 22 May 2006 @ 12:31pm

Bread is not a computer. Food is essential, computers aren't.

While food is an essential, store bought bread is a convenience, a time saver, an affordable luxury in an existence of abject poverty, many things but not a necessity. And if you think computers aren't essential, trying running an industrialized nation without them. I thought the point wasn't to make people better sustenance farmers, to improve the 3rd world, but to move them into the 21st century world with the rest of us. That means ubiquitous and widespread computing power, as soon as possible, as pervasive as possible. I'm in favor of any plan that gets computers directly to consumers quickly, and as I've said, I think this idea makes sense in certain instances.
[ link to this | view in chronology ]
- sumguy, 22 May 2006 @ 12:47pm
  
  Re:
  first of all, they are potential consumers. the only reason ms or intel wants in on this is for exposure to these potentials. as evidenced, they still don't understand the problems and applications for the "potential consumer" and keep thinking in terms of the lower income US set - which is a different problem.
  
  i think he meant essential to the individual in terms of sustaining life. another problem you seem to miss is that the basic material for subsitence (good ovens, potable water, etc.) are lacking - these people aren't buying bread becuase they don't feel like making it, they are buying it because they have no other choice. they are landless, and without resources for the most part.
  [ link to this | view in chronology ]
- Gunjin, 22 May 2006 @ 1:06pm
  
  Re: Industrialization without computing.
  Nonsense. Industrialization existed before computers were even a glimmer of an idea. Computers are not a necessity save by dependence of our own creation. If you had said that computers are necessary for an industrialized nation to COMPETE in the global economy, then I would agree except to say that not every industrialized nation cares about competing in the global economy.
  [ link to this | view in chronology ]
  - Blind, 22 May 2006 @ 3:25pm
    
    Re: Re: Industrialization without computing.
    I think the real problem is industry, it's education. These laptops, or any computer, opens up a world of information, of which they would never be able to access because, for these 3rd world countrys, there would be no way to access it.
    
    Thinks like doctors and scientists can rise from these huts.
    "Knowledge is power." -Francis Bacon
    
    Even some things we take for granted like knowledge of sicknesses and STDs, which where hard to learn, will be at the finger tips of most of the 3rd world nations.
    
    These kids will be able to learn what there parents couldn't. How can you not see the good in that? The target is to get the governments to buy them.
    
    If Microsoft offered their loan system, do you not think that they would A:Cost more in the not-so-long run or B:Be no more powerful.
    
    If A is true, than wouldn't the cheaper one be better? If B is true, than who says that the $100 laptop won't have any financing options for these governments?
    [ link to this | view in chronology ]
mmrtnt (profile), 22 May 2006 @ 12:36pm

The Truth is...
Microsoft and the RIAA are both suffering from the same problem - the inability to come to grips with the fact that their products are, all of a sudden, worth a lot less.

Both profited in the past from a system under which they were the only suppliers. Technology(file sharing) and altruism(F/OSS) have since produced viable alternatives to their products, consequentially destroying their previously sheltered markets.

Both are relying on increasingly ridiculous and insulting means to avoid dealing with this reality.

Microsoft wants to keep pretending that a PC operating system is worth $200US and the RIAA wants to pretend that they are still the final arbiter of popular music availability and value.

feh.

MjM
[ link to this | view in chronology ]
- Joe Smith, 22 May 2006 @ 12:58pm
  
  Re: The Truth is...
  Microsoft and the RIAA are both suffering from the same problem - the inability to come to grips with the fact that their products are, all of a sudden, worth a lot less.
  
  Which, if true, means Microsoft has forgotten history. The rise of Microsoft and Intel came pretty much at the expense of IBM. In technology you always have to be ready for the possibility that a new way of doing things will destroy the whole basis of your company.
  [ link to this | view in chronology ]
James Susanka, 22 May 2006 @ 12:38pm

outlaw linux
"Either that, or why not just wipe out the operating system and install Linux? That's what happened the last time (bubble era) someone came up with a plan to give away free PCs"

you hit the nail on the head - they want to outlaw the installation of linux - this is one on way to do it.
[ link to this | view in chronology ]
- sumguy, 22 May 2006 @ 12:49pm
  
  Re: outlaw linux
  english cannot sentence properly make not idea with valid point expresso
  [ link to this | view in chronology ]
Junyo, 22 May 2006 @ 12:58pm

Besides, your talk of a 3rd world ISP/telco subsidizing computing costs for the destitute is almost laughable.

As opposed to giving a loan, micro or otherwise, to the same destitute person... And yeah, Negorpont's machine is only a hundred bucks, but realistically a real low end PC can be built for not much more, until you factor in the Windows premium. That and Negroponte hasn't given any indication that he would even sell his unit direct to consumers. All I'm saying is if the goal is getting PCs into people's hands, lowering the initial costs of acquisition, even if it increases the final TCO, will in many cases make sense. MS might not be the best company to implement this idea, but they're at least looking at business models, like telcos, that have figured this out. Be nice if people could get past their knee jerk MS hating and just examine the idea.
[ link to this | view in chronology ]
- sumguy, 22 May 2006 @ 3:21pm
  
  Re:
  umm, microloan's are becoming much more widely available for this very purpose: giving loans to people who are least likely to get them.
  
  Negroponte has in fact said that no such plans exist outside of 3rd world nations. The goal is getting a PC to those:
  
  1.) unable to afford a high end PC
  2.) have a device that can work in adverse/low power conditions.
  
  This is not knee-jerk. Microsoft and Intels reaction of scorn and amusement at Negroponte's proposals was petty and pretty transparent.
  [ link to this | view in chronology ]
Jimmy Z, 22 May 2006 @ 2:02pm

Microsoft Bashing
I'm so sick of folks bashing MS. All systems crash when pushed to the limits. When your on top (as MS is), you always get bashed by those on bottom (e.g. panzy-ass Linux and Mac users who need to get a j. o. b.)

Thanks,

James Zadonovic
217.698.5654

---- Auto Sig v2.2 by RadiantSpace
[ link to this | view in chronology ]
Jimmy Z, 22 May 2006 @ 2:02pm

Microsoft Bashing
I'm so sick of folks bashing MS. All systems crash when pushed to the limits. When your on top (as MS is), you always get bashed by those on bottom (e.g. panzy-ass Linux and Mac users who need to get a j. o. b.)

Thanks,

James Zadonovic
217.698.5654

---- Auto Sig v2.2 by RadiantSpace
[ link to this | view in chronology ]
- sumguy, 22 May 2006 @ 3:24pm
  
  Re: Microsoft Bashing
  I'm so sick of M$ people who are too dumb to know when their lame browser is slow so they keep pressing Submit and post multiple times.
  
  idiot.
  [ link to this | view in chronology ]
Theotherhalf, 22 May 2006 @ 2:47pm

Microsoft Bashing
Microsoft is just pissed at the fact that they have worked there self into a corner. It does not take 4.2Ghz x2 CPU and the latest version of Windows XP 64 media Vista SP3 to surf the web and type up a book report.

Someone call Nvidia, I don't thing you can send an e-mail without a 7800GTX.
[ link to this | view in chronology ]
WirelessGuy, 22 May 2006 @ 2:57pm

Jimmy, they are not bashing the software, they are bashing the company who strives to profit over product.

Look, people are talking about bringing knowledge to the people in these areas. You can talk about bread all day long, but how do we educate people at little to no profit? You can't make a PC affordable with Windows costing $70 for a license. Notice that these are crank powered, not electric because the people there do not have electricity. This project is about bringing a very useful tool to enhance people's lives through knowledge. The whole "give a man a fish, feed him today; teach a man to fish, feed him for life" analogy is what is important.

The reason people went with Linux for this project was because it meets the needs of the product (small compact OS that can run on a CD as this doesn't have a hard drive), cheap (hard to beat free) and language growth on Linux is extremely superior to Windows (see ubuntu).

The problem I see with all of the comments from everyone bashing this project is that they are trying to profit somehow in an area where there really are no profits to be had. Lets work together to build up the world, stop trying to bleed the lowest of low income nations dry, and build a WORLD where are kids have some glimmer of hope. Knowledge is the key, and if you can find a better way to bring a tool like a laptop to these third world people that can educate them on how to build a well, raise crops, to read, write and about diseases such as AIDS, hepatitis and bird flu, then come up with a better solution or stop trying to impede a pretty good idea.
[ link to this | view in chronology ]
- sumguy, 22 May 2006 @ 3:35pm
  
  Re:
  obviously, you did not read the book linked to. the whole premise of the post is that there TONS of profits to be made at the bottom of the pyramid and that the relationship can be mutually beneficial for all. Do i agree, hmmm, i'll have to think about it.
  
  The fact is, this little venture really cannot compete with Negroponte and probably is not intended to as the author of the post seems to imply.
  
  Linux was chosen for two reasons: runs on lower cost hardware and is an open platform, making it easier to develop drivers and such...price is definitely a factor but if MS or some other company could meet criteria 1 and 2, they would probably stand as good a chance of being on that device.
  [ link to this | view in chronology ]
Blind, 22 May 2006 @ 3:47pm

Why does it have to make a profit? How about passing all that profit right back to those poor, starving, huddled masses. I have not read that book, but I don't need a book to tell me that if somebody is making money off the poor, he is making money off the wrong people.

Microsoft is a greedy company, but not just for money. Sure, they may not get much money off of pushing their microloan product, but they are also greedy for power.

This is just one more way for Microsoft to gain this power. It is hard to argue what could be, but Microsoft will not do these people right, it is not in a company like Microsoft to do something for pure charity, the stock holders won't allow it.
[ link to this | view in chronology ]