Low-cost laptops are great, but who will pay?

Providing low-cost laptops for children in developing countries is a great idea. But while $200 for a laptop sounds like a bargain in the U.S. or Western Europe, that's not the case in countries where these computers are intended for use. And this raises important questions: who will actually pay for these laptops, and how?

"You can sell a low-cost PC at $100 today or even $50 the next day but ... is it cheap enough or is it affordable enough?" said Lillian Tay, a principal analyst at Gartner in Singapore.

Take Indonesia, for example, one of the world's largest developing countries with a population of 235 million. Indonesia has around 40 million students and buying all of them a laptop priced at $200 -- the approximate price of the One Laptop Per Child (OLPC) project's XO laptop -- would cost $8 billion, a sum that is 3.3 times larger than the money set aside for Indonesia's mandatory 12-year education program in the government's 2007 budget.

And that's just the cost of the hardware, without considering the added costs of support or producing content for these laptops.

Education ministries in other developing countries face budgetary constraints similar to those in Indonesia, meaning little money is left over to fund large-scale computing projects.

As a result, OLPC has not been able to generate the orders it originally envisioned, delaying production of its laptop and raising the question of whether the anticipated orders will ever materialize. To help get things moving, the group has appealed for help from consumers in the U.S. and Canada with an offer to buy one XO laptop, and have another one donated to a developing country.

Under the terms of this 'give one, get one' program, consumers pay $400 for a single XO laptop, and a second laptop will be donated to a child in a developing country. The deal will only be offered for two weeks starting on Nov. 12.

Intel faces a similar challenge with its Classmate PC project. Now that the technical challenges of producing a low-cost laptop have been largely resolved, Intel and others are looking for ways to get the devices into students' hands, including pushing governments to reduce or eliminate tariffs on computers for students. They also want to see ownership of the laptops belong to the students, so they are not restrained by schools from using them outside of class.

"No one has set the right path yet, but they all want to get there," said Leighton Phillips, manager of Intel's World Ahead Program in Asia, in a recent interview.

One possible solution is a monthly payment program where parents pay for subsidized laptops in installments over the school year. But families in developing countries are generally poorer than in other countries -- Indonesia's 2006 per-capita GDP was $3,900 compared to $43,800 in the U.S. -- and that calls for creative financing programs to cover the cost of the computers.

"There are potential subsidies and there are different ways this is happening; some of it can be government-led, some of it can be corporate-led," Phillips said.

With subsidized laptop programs, families could be asked to pay $10 per month in addition to existing tuition fees and receive a computer. Once costs are brought down to that level, the aim of getting large volumes of laptops into the hands of children starts to become realistic, he said.