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Friday, November 07, 2003

Whose Century is It?

This, I'm afraid, is an enormous post. I think it is justified by the quantity of issues raised in the content. The body of the text consists of a edited extracts (by me) from an interview with Shekar Kapur published by Rediff. What amazes me about this interview is that he sees everything so clearly. I have been trying to argue some of these topics here in Western Europe for the past couple of years. With all due respect to Atanu (and without taking anything away from the importance of education and change inside India) while I don't doubt Thurrow's arithmetic, I do doubt his imagination. You see I think here the numbers are everything, and once you pass a critical point, there really is no turning back. Kapur can even see the importance of the age structure of the population, even if he doesn't grasp the full signifiance of this. He even 'gets' the fact that GWB leading the US off on a 'bad for business' war in Iraq may yet have profound implications, well beyond those that were originally envisaged.

So why are virtually none of the conventional economists getting the message? Why do you need a film maker and cultural entrepreneur to explain this to the world? I've thought long and hard about this. The only answer I've come up with is a form of soft-racism. A soft-racism which exists in Asian society itself, in the sense that people feel so lacking in their own self confidence and abilities that they feel it can never happen. Then there's the soft-racism of the left, who need the poor to be poor. I mean if the poor can get to be rich by themselves, wouldn't that mean that capitalism might work? And then of course their is the soft-racism of the political and economic elites in the US and Europe who just can't even begin to imagine that a bunch of yellow and brown people could finally get their act together. Kapur mentions 09/11 and the analogy is a good one in another sense. No one important in the US saw 09/11 coming, because they just couldn't believe it could happen.

Of course when all is said and done, I'm not saying you're all going to have to watch or like all those endless Bollywood films that which are the implicit consequence of everything said below.

Film-maker Shekhar Kapur says the expanding infotainment market, estimated to grow to more than a trillion dollars in 10 years, has profound implicationsfor India and Asia.

An accountant by training before he turned to films, Kapur says the sheer size of this market will give India a global role in defining lifestyles and driving what he describes as a process of 'reverse colonisation'. In the first part of an exclusive interview with Senior Editor Shyam Bhatia in London, Kapur says the Asian century has already arrived, but needs nurturing, guidance, and structure. Excerpts:

What do you base your projections on?

Business projections are not difficult, but, unfortunately, all business projections are done on an historical model. Let's look at the trends. The world is changing so drastically every day that it is not possible to draw conclusions 10 years from now unless you have looked carefully and wondered what new things are likely to happen.

People are predicting that the global media business will be worth a trillion dollars in 10 years. If this growth is coming, my question is, where is this growth coming from? Where are the markets for this growth?

Media includes entertainment?

Yes, media includes entertainment, films, television, games, DVD and video. Newspapers are not that large a proportion. It is infotainment, yes. Every way we look at it, my guess is that 10 years down the line the absolute revenue in the entertainment business will be more out of Asia than from the West. Let's take a look at the demographics. Entertainment demographics run from 14-15 to just under 30. The stunning population statistics are huge in the particular demographics I'm talking about. In India, we are expecting almost 30 per cent of our population to increase within that demographic. In the US, despite immigration, they are expecting between 5 and 10 per cent. So it's not just population growth. It is population growth within that demographic as a percentage of total population

If you talk about the business of health care, I would say yes, given that people are living longer, the amount of people that are going to get into that demographic will be huge as a percentage of the total. So healthcare business, yes. Even that part of the healthcare business they keep talking about, a large part of the servicing is shifting to India. I guess the big service that will shift to India specially is health care. You'll probably find that old people's homes exist now in India. They [the West] will be offloading their people at a huge cost to themselves, but at half the cost of what they have to do to keep them well here.

Are you saying that it's the 15-35 age range that will be consuming infotainment and that huge potential market is in India? Basically, what we are doing is just touching the tip of the iceberg, whether it's India or China. Anyway, when you take Asia, whether it's India or Japan, China, Indonesia, Bangladesh, Pakistan, Malaysia, Singapore, they are all about 75 per cent of the world's population already. Right? So when that happens, one thing people don't understand and what I'm banking all my predictions on is a philosophical thing. What happens is that when the financial strength of a particular consumer group becomes stronger, that particular consumer group starts to extend its own cultural muscle.

When American culture and therefore entertainment started dominating the world after the Second World War (they did it in many ways by giving free entertainment also), essentially they could do what they did because at home they were financially strongest anywhere in the world. So they called the shots and they had the financial muscle to go out and conquer the rest of the world, which was coming out of the wars and was underdeveloped. That's what McDonald's did. Before McDonald's went out and conquered the world in a full franchise system, they were hugely strong in their own home market.

Are you saying that the billion-strong Indians in 10 years time will be calling the shots as far as the entertainment industry worldwide is concerned?

Yes, they will ask for their own culture. And the shape it will take is that it will go mythic. In Asia we like more mythic stories. That's the kind of change we'll have. Over the years the 70 per cent majority will gradually marginalise the Western market. So what happens is that just as we now love Tom Cruise, the West will learn to love our actors and they will get used to those faces. So in 20 years time you could have a Shah Rukh Khan who would earn US $40
million because by that time his market has extended.

What about issues like colour and language?

These are tastes. Language is important. In 20 years time I believe the Chinese will start making English-language films. Just remember all entertainment,80 per cent of the viewership of all entertainment, is dubbed into the local language. So that's never a problem, and it's very sophisticated. Even today a Hollywood film you see in Italy is dubbed into Italian. In Germany it's dubbed into German, in France into French. It's not just Arabic and Hindi that they do, in all of Europe it's dubbed.

This shift in culture and the aggressiveness of the Asian consumer is going to be supported by a large number of that culture who actually live in that lifestyle. Currently there are 27 million Indians approximately who live outside India and their combined GDP is 75 per cent of the total Indian GDP. Add to that Bangladeshis, Pakistanis and Chinese. So there's probably a hundred million Asian diaspora dotted around that will support any such reverse cultural colonisation. They will also have the purchasing power. And the purchasing power at home is growing.

Shall I give you an example of this? Everybody told me Bombay Dreams won't work, including Andrew Lloyd Webber. It became the most successful show in town. Who supported it in the first month? The diaspora. Apollo is the largest theatre in town [London]. It's now going up 80 per cent and 90 percent every day and 100 per cent at the weekends. Still, it's one year down the line. It was for the Really Useful Group -- Andrew Lloyd Webber's company -- the fastest payback for investors ever. Not even Phantom of the Opera returned it that fast. All investments were recovered within a year, in fact within eight or nine months it went into profit. So I have tested my theory here. The idea came to me here in London, but I have been in that mode if you like, that Asian culture is going to be the culture of the future. That's why I go to the World Economic Forum every year, I talk about it. People understand it, but they don't know what todo about it. We'll come to that later.

Let's talk more about Bombay Dreams and about growth. If you talk about ticket price growth, in the US it has gone up from about US $5 to $7.

In the UK or Europe it has gone from $6 to $7. It has not been that amount of growth. But take India. It has gone up from Rs 40 in the balconies to Rs 250 in the inner cities. We have more multiplexes being built in India and China than anywhere else in the world.

Is cinema the only avenue you are looking at?

No, let's take television. Twelve years ago India had two state channels and now we have 24 channels. The number of consumers is there. Let's go further. The figure of US $1.3 trillion is never going to be achieved unless there is some kind of merger between various industries, what they call convergence. A convergence between digital and entertainment. Ultimately, what is convergence? People keep talking about it. The end use is always towards the consumer. That's what you are aiming at. The biggest thing convergence will do is change delivery systems. This morning I justset up my broadband and I found a thousand radio stations to choose from.So I'm picking up radio stations from all over the world and it's incredible.Broadband video screening is giving me convergence, so I don't even need to switch on the radio anymore. I have 1,000 radio stations and I can just turn them on.I'll give you an example. Steven Spielberg today decides to release Jurassic Park, let's say. Because it is an event -- like the Harry Potter book or the new Microsoft operating system -- there are queues of people waiting to see it. Why? They could wait for a few days or a week. But human beings in this attention-grabbing world can be provoked into doing this kind of thing. I've seen it in India: first day, first show, everybody wanted to see the show in the first week, on the first day, just to be able to say they had seen it. And they were willing to pay. At a time when the pricewas Rs 10, they would pay Rs 300 to get into the first week, first day show.

Everybody now recognises Asia. The first attempt will be Western corporations to try and treat this as an extension of their product, a market that will extend their product and, yes, MTV will say yes, that's okay because we can do local programming. It doesn't work like that because the intention is not the same. The intention is to increase your shareholders' value and the shareholders' value is held mostly outside. That's where you go wrong. The Asianisation of these businesses will probably come from people who are Asian and who are happy to earn in rupees or earn in the progress and become part of the progress and the expansion of Asia. The only Asian corporation today that is very extensive in infotainment is Sony.

At the last FICCI [Federation of Indian Chambers of Commerce and Industry] meeting I spoke about these figures and I talked to people about the possibilities. I even went into the detail of creating for them a plan, a ten-year plan. Mike Grindon is the head of international television at Sony. He was also speaking at the same thing and wrote me a note, saying every statistic, everything that you've talked about, is exactly the view of the chairman of Sony. This is exactly what he is saying and he is so frustrated with his team in LA who actually control the software of Sony that they don't get the future importance of Asia. That's the problem.

It's an Asian corporation that understands Asia, is Asian, and is being run by Americans who have their own world view. The next thing is that investment in India, in China, in Asia is going to increase dramatically. Where will all the Arab money go now? They don't want to invest in the US. Europe is not offering great investment opportunities. Where is the investment opportunity? Asia! One of the things Mr Bush has done is accelerate this process. Through the Iraq war he has created a divide and that divide will only help Asia. That's what we saw in Cancun when all the Asian economies got together and Brazil joined in. I don't think it would have been possible if Iraq hadn't happened. That's my guess.

The big business opportunity now is for this big Asian corporation, or corporations, to come in and take a long-term view and see that if 70 per cent of the growth in revenues from the entertainment, infotainment, media business is coming from Asia, are we looking at out of US$1.3 trillion, at least $700 billion coming from Asia? If there is a $700 billion future market, how much of that comes from India? Can India take 30 per cent of that? Are we then talking about a $200 billion business that can come out of India?.................................

As a government, as a society back in India, what can we do about this impending change?

We need strategies to take advantage of this. We have to decide which city will become the centre of media in the next 10 years. Because if you are not careful it will be Shanghai. Could it be Mumbai or another Indian city? I think the corporations must start investing.

What we don't have now is structure. The growth is happening in unstructured movement. It's boiling consumer demand and attitude that's pushing it without anyone at the top understanding what's happening. Nobody is pulling it. There's a push factor happening on its own, there's no pull factor. A pull factor that can happen with a large strategy and a corporation saying, 'If we set this, this, this up, and then open the floodgates, we are ready for a catchment area, we are ready to direct this place.' So basically what it needs is large investment, strategy, co-ordination. I have talked about this at the World Economic Forum, Indian film forums and I've talked to the Indian government, which totally agrees with me.

This is superpower stuff?

Yes. Look, when you sell American culture, what follows? McDonald's.We don't buy McDonald's because we love McDonald's. It's because we aspire to a lifestyle. We buy Levi's because it's American culture. You buy McDonald's because it's American culture. Tourism follows.

The Lord of the Rings increased New Zealand tourism by 30 per cent. Go ahead 10 years and see how everything Asian and Indian could become popular.Indian lifestyles, Asian lifestyles, could become popular because this is where everything will be marketed. It will be Indian glamour programmes like The Bold and The Beautiful with Indian models and the Indian scene. Sex and the City will be Indian. It will be watched in New York, that's what will happen.

The Amitabh Bachchan 20 years from now will be a major megastar worldwide, possibly the world's biggest star. That's what's going to happen. Gucci and all these others won't be the big brands, the big brands will be Asian.You'll have an Indian brand that sells all over the world, Indian designers, Indian models, everything Indian or Asian. But you need structure for all that. Because if you don't, Western corporations will try and profit. Trust me, they know about this, they understand it, but they don't know what to do about it. Their attitude is, it's a market for them. I'm saying, 'No, they are a market for us.' There is the big difference and if you can do it in the entertainment business, all businesses follow, attitudes change.

In summary, are you saying the Asia century is upon us and the defining issues of fashion, lifestyle, entertainment will all follow ?

Yes, because attitudes change.
Source: Rediff.com

The NYT addresses India's demographic issues

Amy Waldman writes about various state-level initiatives being considered to control the spiraling growth in population, especially in northern India.

India itself had recoiled against coercive policies — like China's — after the ruthless sterilization campaign under Indira Gandhi in the late 1970's.

But today, the national mood increasingly favors a tougher approach, and states, free to adopt their own policies, are experimenting. At least six have laws mandating a two-child norm for members of village councils, and some are extending it to civil servants as well. Some states have considered denying educational benefits to third children. States are also increasingly turning to incentives — pay raises, or access to land or housing — for government servants who choose sterilization after one or two children. Across some states in North India, local elected officials are increasingly obliged to mount explicit defenses of their decisions to procreate. The reason: laws limiting members of village councils, or panchayats, to two children, on the notion that they should provide models of restraint.

Of course, if one were to look at the success of the Kerala model, there certainly weren't any laws involved. The drop in the birth-rate was brought about by educating and empowering women. So, I am not sure how the Chinese approach will work within the context of a chaotic Indian democracy.

Thursday, November 06, 2003

The $2.7 Billion Boondoggle to come

Edward's post yesterday Rural Connectivity in India on the report India Plans $2.7 billion IT investment left me with a sense of despair. Since he wondered what the RISC team would feel about it, I thought it appropriate to respond even though I do not speak for Reuben or Rajesh (the other two RISC people on this blog.)

For a country to develop, resources dirtected to investment -- as opposed to consumption -- is good because it builds productive capacity and helps increase productivity. With increased productivity, a greater amount of stuff gets produced produced using the same amount of labor. Given more stuff, the average amount of stuff available per person is higher and that can be allocated to further investment and some even for greater consumption. My stating of the obvious is merely to underline the distinction between investment and consumption although they are both subsumed under the heading 'spending.' How much is the $2.7 billion spending spree is going to be investment and how much consumption is a matter of concern.

How much to allocate to investment and how much to consumption depends on the objective function of the policymakers. The private objective function of the policymakers may be quite different from the publicly stated objective function, however. After all, the Indian Government did not declare sometime after independence that their objective function was to strangle the economy and retard growth so as to extract as much rent as they could from a small set of large business houses by instituting a licence-permit-quota regime. What they said was that their objective function was to maximize growth, the eradication of poverty, the development of rural areas, the emancipation of women, the removal of caste barriers, et cetera. In short, their stated goal was little short of unleashing peace and prosperity for all and sundry, all done through the benevolence of the babus that were at the helm of affairs intent on climbing the commanding heights of the economy.

I get a feeling of impending doom every time I see yet another utopian objective function being declared and mega billions of rupees allocated for reaching that stated objective. Yet once more we will be spending huge amounts of public money. How much of it will actually be investment and how much of it will be consumption is the question. How much of it will be effectively used by the intended receipients and how much will leak out, is another question. Development is the stated goal but whose development is the critical question.

It is easy to spend $2.7 billion. Here is a break-up:

500,000 PCs (with power supplies etc.) at $1500 for a total of $750 million
MS Windows for 500,000 PCs at $300 for a total of $150 million
1 million Voice based info technology device at $500 for total of $500 million
Infrastructure for 500,000 kiosks at $2000 for a total of $1 billion
For high flying executives, for McKinsey to write fancy reports, for governemnt kickbacks
for the awarding of contracts, for old fashioned bribery, etc only $300,000,000 ($300 million).

There you have it. $2.7 already "invested" in IT to bridge the digital divide. I put invested in quote because I don't believe that it does anything for the 700 million people it is supposed to benefit. The actual beneficiaries are Microsoft (software), HP (Hardware), some local companies making the "voice based technology device" (which probably will be as useful as the mythical Simputer), McKinsey with their highly paid consultants, government bureaucrats, and politicians. It will be a party. All, except the poor, will be invited.

About 10 years P. Sainath wrote a book with the catchy title "Everybody Loves a Good Drought". He was traveling with poor migrant farm labor for some time trying to understand how they live and wrote dispatches for the Times of India. These migrant labor are the poorest of the poor. Government programs exist to help these people out -- on paper of course. Monies are spent when a district is declared hit with drought. Everybody loves it -- because the whole administrative structure can feed at the public trough. Everybody, that is, wit h the exception of the poor migrant laborers. They starve.

I think it is time to write one with the title "Everybody Loves a Good Digital Divide". I don't believe that there is a digital divide in India. Then why is it such a big hit in India? Perhaps if there is no digital divide, it is necessary to invent one so that resources can be mobilized to bridge it. And once spending is authorized, who the heck cares how much is really invested and how much is consumed.

Wednesday, November 05, 2003

Rural Connectivity in India

I've got some comments to make on the 'infanticide' debate, but I'll leave them for later in the week. On another front today, Infoworld has an interesting piece on what it calls projects to bridge 'the digital divide' in India. Now I know Atanu has strong views on the uses and abuses of this term in the Indian context (BTW I read at the weekend that 1 in 4 children in the US are now using computers at the age of five). My point with this post is not to get into this (I suppose we inevitably will have some interesting debate about it a little more downstream). My point is to see whether any of our RISC colleagues would like to comment a bit more on what all this implies and where it is going. I.E. what is the state of play on this right now?

India plans $2.7 billion IT investment

Government embarks on four-year effort to bridge digital divide

By John Ribeiro, IDG News Service November 03, 2003

BANGALORE, INDIA - The Indian government plans to spend $2.7 billion over the next four years to bridge the country's digital divide, according to a government official. "You do not want to get into a situation where information and communications technology, and its progress create social chasms and economic chasms between the haves and have-nots," said Rajeeva Ratna Shah, secretary for industrial policy and promotion in the federal government, at a conference Sunday in Bangalore, India.

As part of its investment in technology and infrastructure, the government plans to introduce a voice-based information technology device that and can be used by Indian villagers regardless of the language they speak. "(The device) should be able to take commands orally," Shah said. "There must be total interactivity and literacy should not act as a barrier. Language should also not be a barrier. We are moving towards that.'' Shah did not however disclose the technical specifications of the device. This is not the first time engineers in India have attempted to design a low-cost computer device for rural use. However, the Simputer, a Linux-based handheld mobile computer, with a target price tag of about $200, ailed to take off because of insufficient interest in its target market. A number of nongovernment organizations, multilateral aid agencies, educational institutions and state governments have also launched projects for bridging the digital divide in India, where more than 70 percent of the population live in rural areas where literacy levels are low and poverty is grinding.

The corporate sector also is discovering that bridging the digital divide could translate into new market opportunities. For instance, HP Labs India, which was set up in Bangalore by Hewlett-Packard Co. (HP), is developing products appropriate for India's rural markets. HP is based in Palo Alto, California. Intel Corp., based in Santa Clara, California, has invested in research at the Indian Institute of Technology in Chennai to explore the viability of wireless Internet connectivity in rural areas. But the investment Shah outlined Sunday is the first time the federal government has put its weight and considerable funds behind such an initiative. A pilot project on broadband connectivity for rural areas is already under way in the state of Uttar Pradesh, according to Shah. In another trial project near Delhi, postal employees are downloading e-mail on wireless handheld devices and delivering them to villagers, who then use the devices to reply to the e-mail, Shah said. The government also plans to introduce a government-to-business portal, which will allow foreign investors to interact directly with the government, and "enable us to cut corruption," Shah said.
Source: Info World

Don't uncork the bubbly just yet

Subir Roy takes us through, the opportunities and problems for the new RBI Governor. The good news is that bank lending seems to be going up, the bad news--and old news--is that rural credit is still a problem. So is credit for small businesses. I was talking about this to a friend of mine who exports leather garments. The banks still give small businesses a hard time.

In the search for a banking system which will serve the needs of broadbased growth, attention has inevitably turned to rural credit. Dr Reddy has candidly admitted that so many institutional innovations have been tried, from bank nationalisation to supporting the cooperative credit movement, but the credit needs of the rural Indian go unmet by the organised sector.

He has been bold enough to rhetorically declare that he would happily allow the panchayats to lend if they could handle the job. Rural lending, along with support to micro credit organisations, offers a key growth opportunity to banks which have lost their prime corporate customers through the process of disintermediation.

Other than rural borrowers, smaller businesses also make up a key segment which has largely been left out of the party. Rates of interest have gone down for large companies and those seeking personal loans but not for the smaller businesses.


Tuesday, November 04, 2003

I am sorry that I am unable to persuade Vivek about the danger of banning of selective aborting of foetuses. This may have something to do with the whole issue of abortion in general. I have come to conclude that positions on abortion are generally deeply ingrained prejudices and reason is pitifully inadequate to alter them. One holds on to one's opinions with religious tenacity. I will try once more, in vain perhaps, to restate my argument.

Vivek writes:

Atanu sets up a false choice. Infact aborting the female foetuses and the terrible fate are two sides of the same coin. You can't get rid of one without getting rid of the other. Does Atanu truly believe that aborting the female foetus will improve the lot of the girl child?

Technically, the two sides of a coin present a dichotomous choice. Therefore if one claims that two matters are akin to two sides of a coin, one is admitting that there is a dichotomy and therefore a choice is implied: you can either have a head or a tail, but not both. Therefore, one cannot accuse me of setting up a false choice while admitting that the issues are two sides of a coin.

Now about the matter of whether aborting the female foetus will improve the lot of the girl child? Clearly, if the neglected girl child is the one which is the result of the completion of an unwanted pregnancy, then the aborting of the foetus will not result of the girl child and therefore it is an improvement in that there will not be a girl child to be abused and neglected and sold to Jat farmers and so on.

My gripe with policy of banning selective abortion is this: it does nothing to address any of the causes of problem; it merely attempts to deal with the effect. It is dangerous to attempt to supress the effect. The effect is a signal that there is an underlying fundamental set of causes and that we must do something about that if we don't want the effect. By suppressing the effect (the signal), it is possible that we lose our drive to fix the cause. If I take a headache pill and supress the effect, I will have less of an incentive to inquire into the cause. Perhaps the headache is a signal of a growing tumor. Suppressing the headache could make me ignore the cause and hasten my demise.

Monday, November 03, 2003

More on Female Infanticide

I'm afraid, I think Atanu is still wrong. As I said in my last post, I do not think even for a moment, that Atanu (or for that matter Prashant) condone discrimination against women. But I still think their argument is horribly and dangerously wrong. It is logically flawed and it ignores evidence.

In his rejoinder to my post Atanu writes:

My position is that the fact is that some people value female children less than male children. This is a lamentable fact but a fact nonetheless. I did not dictate that people value girls less. I am taking that as given and (at least for the present) unalterable fact. Breast beating may feel good but will do little to alter that fact. Altering that fact would be an end that all right-thinking people devoutly wish for. It may take a few generations. Until then, what is the most humane way to deal with the problem. Do millions of unwanted girl children have to suffer inhuman neglect? Can society protect the rights of children with as much gusto as the protection of foetuses? Which is the lesser evil: the aborting of female foetuses or the terrible fate of an unwanted girl child?

Atanu sets up a false choice. Infact aborting the female foetuses and the terrible fate are two sides of the same coin. You can't get rid of one without getting rid of the other. Does Atanu truly believe that aborting the female foetus will improve the lot of the girl child?

Well there is no evidence. The EPW article I linked to made it quite clear that the reality of gender relation in Punjabi society for the last 100 years were much more complex that Atanu is prepared to concede. He simply ignores all externalities. Also read Kaushik's post for a more complicated but more complete picture.

For example, the declining sex ratio might manifest itself in more complicated ways than Atanu imagines. There was an article in Outlook a few months ago about "brides" (read sex slaves) being bought from Eastern India by relatively wealthy Jat farmers of Haryana.

Perhaps, in some sufficiently long run the declining sex ratio would be more evenly spread accross India due to human trafficking. Therefore the price of brides would increase in Eastern India and price the Jat farmer out of the market. But by then maybe Burmese girls would be avaliable and the merry circle of life can continue. Or maybe other externalities would muddy Atanu's faith in the price mechanism.

In any case, Atanu should try and tell that to the frightened teenager whose is being sold to the Jat farmer who will use her for a few months and the chuck her out.

So do I have a dear solution. Nope but then I do not believe in dear solutions--only liberitarians do. The solution is education, empowerment, employment. To quote Mr. Rumsfeld its the, "long hard slog".

In addition, as Kaushik (and an excellent article by Prof Sen a few years ago) points out, most of the of the discrimination girls face occurs in more subtle and harder to detect forms--for example parents spend less money on their nutrition, healthcare, education etc. Outright murder is still relatively rare.

Sunday, November 02, 2003

Affordable Computing

Rajesh tells us he gave a presentation on Affordable Computing, as part of the "IT and Common Man" session at the BangaloreIT.com thrash. As he says, much of his talk centred around what he's have been writing in his emergic Tech Talk series on SMEs and Technology.

He aslo draws attention to the presentation given by Ashok Jhunjhunwala, who spoke about how some of the group of companies incubated out of the Telecom and Computer Networking department at IIT-Madras are helping to realise his dream of doubling India's rural GDP from Rs 10,000 to Rs 20,000 over the next decade. As well as this fascinating presentation, Ashok has a lot more interesting material onsite, including a document entitled 'Making the Telecom and IT Revolution Work for Us'. His argument: look for big cost reductions in the price of Telecom and develop appropriate policies which enable decentralized operation

A more detailed look at costs of telecom and Internet networks around the world reveals that in the West, the cost of providing a telephone line is around $800. We use the same technology and it is not surprising that our numbers are similar. But this cost of $800 was reached in the West more than a decade back. There too, an operator needs between 35-40% of initial investment as yearly revenue to break even. However, this amounts to barely $30 per month and is affordable to over 90% of the homes. Therefore, homes in the West have been fully wired up quite some time back. Now, reducing the cost further, no longer expands the market. Their R & D focus therefore naturally shifts to the replacement market, where more and more features and services need to be provided rather than lower cost products.

However, technology at this cost is hardly affordable to a few percent in a country like India. The cost needs to be reduced by a factor of three or more for telecom (and Internet) to be widely affordable in India. Who would do this? Not the R&D efforts in the West. Naturally, this becomes the task of Indian R&D. Such cost reduction is not easy. Coming up with a disruptive technology that could reduce cost by a factor of 3 would require total mastery of current knowledge in the area and a lot of innovations. But then R&D efforts are always a challenge. The important thing is that if one achieves this, one would also become a technology leader in this area. And if it results in a production of 150 million telephone lines in India (and may be 500 million lines taking into account similar requirements of other developing countries), one would rank among the world's best product designers and largest manufacturers (150 million lines even at Rs.10,000 per line implies production of Rs.150,000 crores). A service industry that would operate and maintains 200 million connections would employ a large number of people.

But above all, such telephone and Internet connectivity can start changing the lives of people. Using Internet, resources can be deployed more efficiently. With telecom and Internet connectivity, Indian villages would have the necessary infrastructure to stand up in the world. It could make our agriculture more remunerative and give our home-based industries a potential market for their wares at fair prices.

Besides reduction of equipment cost, which reduces the investment required to provide telecom and Internet connectivity, one has to develop technologies that lead to reduction of the operation cost. Conventionally, a large initial investment (of the order of several tens of millions of rupees) is required to start providing connections. It is possible today to come up with small access systems, which could be connected to a backbone telecom network. Such access systems would require low initial investment and could be operated very much like cable head-ends. A small entrepreneur could then serve a neighborhood (either a few streets in an urban area or a few blocks in a rural area) and provide low-cost service in an accountable manner. Of course, for this to take place, one would require not only technology, but appropriate policies which would enable such decentralized operation.