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How is Datawind's ultra-low cost tablet changing India?

by Kavitha Nair

February 19 2012

It's been four months since India launched its Aakash tablet initiative. TabTimes checks in on the reception, the economics, and the longer-term ramifications of the project.

The government of India’s high decibel announcement of Aakash, the ultra-low cost tablet in early October created quite a stir. Even as comparisons with past initiatives were drawn, and questions were raised about connectivity, price, value and ship date, officials appear to be leaving no stone unturned to ensure the success of this tablet for the masses.

The underlying goal for Aakash (which means sky in Hindu), as emphasized by Mr Kapil Sibal, Union Minister in India for Human Resourced Development (MHRD), is the elimination of digital illiteracy. Consequently, MHRD has invited collaboration, ideas and inventions from the community of academics, experts and inventors to achieve this goal.

There has been a clear drive from the Indian government to strengthen its approach for public education. “Future efforts will move in two directions," the press release announcing Aakash stated many months ago. "To achieve the same functionality at a lower cost and to achieve added capabilities at the same cost.”

Unfortunately, several initiatives and launches of low cost computing devices in the past that have attempted to bridge this same digital divide have met with little to no success.

Why will the Aakash tablet be any different?

Aakash too has had its share of roadblocks. The world’s cheapest tablet, which was to be released in January 2011, was delayed and the Government had to put the bid out for the project again. DataWind has had to contend with this issue amongst many others.

“I can understand the skepticism,” says Suneet Singh Tuli, CEO of Montreal-based DataWind, whose core business is providing wireless web access products and services. “The key difference between this and past initiatives lies in delivering to the cost announced.”

DataWind succesfully bid for the pilot order to manufacture 100,000 units in collaboration with IIT Rajasthan, under the Ministry of Human Resources & Development’s (MHRD) National Mission on Education through Information & Communication Technology (NME-ICT).

To date, the cost plan hasn't changed. The Indian government will purchase these devices at all inclusive cost of Rs 2250 per unit (US$48.98) and subsidize them at Rs 1750 (US$35) for post-secondary students, available at their institutions across India.

However, since its initial launch, Aakash has received mixed reviews, largely because of concerns around product quality and, perhaps more importantly, the lack of data- and network-oriented infrastructure in India. Critics have questioned the lack of reliable connectivity across the country and have been bitterly disappointed by the lack of access to valuable content.

Information on Sakshat's website (the education portal from the Ministry of Human Resource Development) reveals that educational content will be available through this portal soon.

The site adds that the Ministry has placed a consolidated order to the state-owned telecommunications company Bharat Sanchar Nigam Limited (BSNL) to connect all the University and colleges in India to the Internet. (A majority of them are already connected, but not all.)

Furthermore, a project under NME-ICT is underway that aims to provide standalone network-based solutions for very low cost connectivity in students’ homes. If successful, the cost of a lifetime 256 Kbps connection could run as low as Rs 1400 approximately ($28).

The real cost and profit model for Aakash

Aakash was manufactured in Hyderabad, India at DataWind’s new production line set up specifically for this purpose. 

The production cost of these tablets is in fact lower than Rs 1750 (US$35), and its ex-factory rate is $38.98. The additional $14 increase in cost is due to factors like replacement warranty, performance bonds, import duties, and more.

Tuli explained that harsh climatic conditions in India increase the ratio of defects of any device sold here compared to US and Europe. This called for a replacement warranty, unlike the regular warranty, where the discretion rests with the manufacturer to either repair or replace a defective device after the first 30 days of purchase. (Aakash comes with a one-year free replacement warranty.)

The additional cost also takes into account the performance bond that lasts 14 months and additional sales tax. Aakash is exempt from 14% duty normally levied on the import of mobile device- this tax does not extend to the commercial version.

The $35 price is achievable, feels Tuli, but it would require the Government to purchase 2 million units for the break-even volume to occur. Accordingly, DataWind has accordingly submitted a proposal to the government, which excludes the SD card, change in warranty and removal of performance bonds.

“I believe the current structure is for the 100,000 units and the Government is willing to put in place a regular replacement warranty for the next batch,” Datawin's Suneet Singh Tuli explained. The Government is expected to issue another bidding process for the next batch of device, which ensures competition, openness and transparency, he elaborated.

Aakash is now available for purchase, as is a commercial version of the tablet named the UbiSlate. Available for Rs 2999 ($60), the UbiSlate has a capacitive touch screen and 700MHz processor compared to the 366MHz processor in Aakash.

DataWind also plans a higher-end product in India, as well as a mid-range product in UK. As a mobile virtual network operator (MNVO) in UK, Datawind can provide the device as well as network access. The suggested retail price of the UK tablet, which has yet to be named, is £99 and will include one year of free Internet access. It will also function as a mobile phone.

Will Aakash motivate other governments to bridge the digital divide? 

Despite the early reviews and reactions, the impact of Aakash on the tablet market and the uptake in usage remains to be seen. However, the legacy of this initiative could last longer than the device itself.

Jeff Orr, Group Director of Consumer Research at ABI Research, believes that this model is important because it could be seen as a way ahead for other countries with similarly low penetration for computing and communications devices.

“One of the first discussions I had after the announcement of Aakash was interest coming from Africa," Orr said. "A device like this creates a motivation for other central governments to fund involvement in digital dividend applications. While challenges abound, affordable mobile devices have the potential to enable the Indian market through better and timely information access for students.

Orr's notions appear justified. In the months after the Aakash launch, Brazil, Thailand, Turkey, and Sri Lanka all evinced interest in this device.

In the interim, Sibal has expressed his desire for Aakash to be used for e-governance projects. In a recent interview with Business Standard, Sibal said that Nandan Nilekani, head of government agency Unique Identification Authority of India (UIDAI), is on board with the project and has been asked to develop Aadhaar applications for the tablet.

UIDAI is responsible for implementing Aadhaar, a government-mandated database of the country's residents that utilizes a unique twelve-digit number for each resident of India. Biometric data such as fingerprints and potentially iris scans will be contained in the database. 

DataWind too has joined hands with National Association of Software and Services Companies (NASSCOM) foundation, and put in place a contest whose goal is to stimulate the non-profit network across India. In this contest ten participants have an opportunity to win 20 tablets each by explaining how the tablets will be used for socioeconomic good.

Kavitha Nair is a financial-technology reporter who lives in London, England

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