Friday, November 18, 2005

Theoretically cheap

The Herald reports today on the MIT Media Lab's OLPC scheme to produce an USD100 (NZD150) laptop for schoolchildren in developing countries.

Reading the website in more detail, one thing I notice is that the $100 is a manufacturing cost (and they are actually finding quotes closer to $110). I worked on a consumer device project a while ago, and we reckoned on a sale price of four times the factory cost. You might think that excessive, but there are a lot of costs in getting a design into a factory and getting units to end users (R&D, purchasing, distribution, cost of capital, retailers margin, advertising, support, etc...)

Now the first thing you'd say is that OLPC aren't evil capitalists out to make a profit, so that will reduce the price substantially? Won't it? Well the largest maker of "cheap for a reason" PCs, Dell, made a 6% profit last year. Most mutuals (like Southern Cross or the Uk's Nationwide Building Society) don't sell their products much cheaper than profit making competitors - they usually reckon to aim to make a surplus and pass it back to customers in later years - aiming at break-even is just too risky. You'd probably expect OLPC to target a 10% surplus in the early stages just to cover contingencies - so their margins will need to be *more* than the commercial competition.

They also plan a rather different supply chain to the rest of the industry. They intend to sell in minimum quantities of a million units directly to developing country governments. For cash. Won't that cut out all the distribution costs? Well... The devices will still need to be boxed, shipped, distributed to the schools or whatever. The teachers (at least) will need to be trained. They will need a helpdesk, as well as some means of getting faulty units fixed. They'll need upgrades. The machines will need to be localised (unless part of the plan is to impose the English language on everyone). The governments themselves will need to fund the purchase of the machines - probably a good year ahead of any actual deliveries.

If the assumption is that the governments are going to receive bulk shipments of hardware and find everything else themselves, then the $100 price isn't real - they'd need to buy the laptops *and* set up a whole infrastructure to support them.

It's also not reasonable to assume that just because the sales are negotiated with governments, there won't be any sales costs. Even honest governments will take quite a lot of negotiating before they will fork out $100 million (plus possibly the same again in support costs, as we saw above). They might reasonably want OLPC to set up a back-to-back aid deal to finance the purchase. Also, many developing countries have rather corrupt governments and will probably want substantial bribes - all of which is going to send OLPC's overheads up.

So this $100 laptop is starting to look at having an effective retail price not far short of $400.
How does that compare with Evil Capitalism? Dell are offering a laptop for $499 with the usual 30G hard disk, 256 measly megabytes of RAM, Celeron, Windows XP, etc.

It does strike me that the OLPC could just go to tender for five million bog standard laptops loaded with Linux (or persuade MSFT to donate Windows licenses), drop-shipped to various third world airports. Add in a bit of subsidy from their public spirited backers (Google etc) and the total cost once the boxes reach the schoolroom will probably be a whole lot less than Negroponte's neat green and yellow boxes.

Final cynical point - this is a pretty major product development project - how many of the people on the OLPC board have experience in mass market product design and production. Answer: none of them!

The picture looks cool though!

Thursday, November 17, 2005


Five internet entities that are less real than A J Chesswas:
1. Craig Ranapia
Maori National supporter I can believe, gay National supporter I can just about believe, but gay Maori National supporter?
2. The women variously featured on David Farrar's blog.
3. Ms Vilefile
Has to be a bloke.. All apparently desirable chicks on the Net are.
4. The about-towners.
They sound like socialists but they hold office in the Labour party?
5. Rich
The product of a buggy experimental auto-comment generator seeded with a database of new Zealand media.

Friday, November 11, 2005

Green Challenge

Nandor has confirmed that he'll be back in parliament. While it's really tragic how this has occurred, I think it's great to have him back.

A lot of people in and around the Green Party seem to disagree however, to judge from these comments on frogblog.

(As I commented on the blog) I think these people are very misguided.

To me the challenge for the Greens is to build support amongst their natural constituency - young people. Youth is very badly represented in NZ politics - I don't know if it's Māori or old-English concepts of elders being betters, but we have an extremely grey parliament. Even in the Green Party, all but Nandor and Metiria are over 50.

The Greens lost votes at the last election - next time, 6% of the voting population will be first time voters (today's 15-18 year olds). The challenge for the Green Party, IMHO, is to engage with those people. Getting even 20% of their vote would give the Greens a 1% increase overall - and I can't see this is hard - if you polled a bunch of teenagers their opinions would, I suggest, engage very closely with the Green Party's policies.

Nandor needs to be part of this - and yes, it *is* important that to many young people that they don't risk a criminal record merely through choosing to ingest certain substances.

Wednesday, November 09, 2005

Broadcasting finances

Jordan commented on public broadcasting a few days ago, suggesting that it would be a good idea to make TVNZ a wholly state funded public service broadcaster.

Broadly I'd agree with this idea, but I thought it would be interesting to look at the figures. The table1 shows a (rough) comparison between public service broadcasting spend in NZ, Australia and the UK.

As you can see we spend less than Australia and a lot less, even after PPP adjustment, than the UK. In some ways we get better value for money - the BBC makes a lot of purely commercial programmes that simply compete with advertising and subscription funded broadcasters for ratings.

A difference between Aus and UK is that the latter, as most of you know, has a license fee - e.g. a compulsory subscription for BBC content. Australia funds the ABC out of general taxation.

What would it cost to have an advert-free, public service TV1 (and a fully commercial TV2)? Let's assume the $470mln revenues of TVNZ split $270mln to TV1 and $200mln to TV2. We'd be looking at $270mln to fund TV1 as it stands. However, given they would no longer need to chase ad revenue, they could cut their costs quite substantially - we could maybe have a watchable quality broadcaster for $120mln.

It would also be reasonable to assume that the pot of ad spending in NZ is constant - which would mean that if TV1 stopped taking ads, all the other broadcasters (including TV2) would be able to hike their rates - resulting in a revenue windfall.
So one option for additional TV funding would be a tax on ad revenue - if this raised $80mln, then taking $30mln out of NZ On Air would, with the TVNZ Charter money, neatly cover the costs of an ad-free TV1.

Now those on the right will no doubt argue that this would be a horrible confiscation of private funding - personally, I'd see it as a very reasonable amount to preserve our unique culture.

1. Recent spending on public service broadcasting (NZ$)

Total Per capita Adj for PPP2
New Zealand
TVNZ Charter 133
NZ on air 97
Total 110 28 28
ABC 890 44 39
BBC 7350 123 55

2. PPP adjustment based on the Penn World Table

3. The TVNZ charter amount is a notional figure from the annual report. In physical terms, I think this represents profit foregone by the New Zealand people that would otherwise have been made if TVNZ worked on a purely commercial basis.

Friday, November 04, 2005

Poo fireworks

I'm not sure quite what they were trying to say here...