TECH TALK: Transforming Rural India: TeleInfoCentre Economics

How much does it cost to setup a single TeleInfoCentre? Assuming 3 computers to begin with (2 thin clients and a server, which can also be used as a client), the costs are as follows:

Thick Server: Rs 30,000 (any standard desktop can work as a server; also has a CD-writer to write CDs for offline data distribution)
2 Thin Clients: Rs 20,000 (over time, we will get to the Rs 5,000 per PC price point)
Software: Rs 7,500
LAN Networking, Modem, Telephone Line (if available): Rs 12,500
Scanner, Printer, Webcam, Speakers: Rs 10,000
Power Supply: Rs 10,000

This brings the total set-up costs to Rs 90,000 (USD 1,800).

Monthly Operating Costs are as follows:

Operator Salary: Rs 2,500
Connectivity: Rs 1,000
Consumables (Paper, CDs): Rs 500
Maintenance: Rs 500

This totals Rs 4,500 (USD 90) per month.

Assuming the set-up costs can be amortised over three years (through a bank loan or some other form of financing), the monthly cost on account of the upfront investment comes to Rs 3,000. Add to this the Rs 4,500 monthly operating costs and we get a figure of Rs 7,500 per month as what is needed for break-even.

The assumption made here is that space costs are zero that is, the space is provided by the entrepreneur or the village at no charge for the TeleInfoCentre.

The question is: how does the TeleInfoCentre generate a minimum monthly revenue of Rs 7,500?

As we had discussed earlier, if the TeleInfoCentre supports a village of 250 families (1,000 people) and each family pays Rs 20 per month as a subscription fee for a basket of services, then this generates a monthly income of Rs 5,000. The deficit is still Rs 2,500 how does this get covered?

There are multiple ways by which the TeleInfoCentre can generate additional revenue:

It can take up data entry jobs or other such work to better leverage the computers that it has.
The state / district can pay for some of the services that it uses. For example, on account of the TeleInfoCentres, the information collection and dissemination costs can be reduced. Part of those savings could be channelised through to the TeleInfoCentre.
Some funds could be allocated from the village for the operation of the TeleInfoCentre, since the village administration will also be a significant user and beneficiary.
Additional services can be offered for the villagers beyond the base set, which can result in more revenue.
Ads can be shown on the screens to create a revenue stream from companies interested in reaching the rural markets.

In addition, the amortisation (or loan payback) period could be extended from three years to four years, resulting in bringing the break-even figure down to under Rs 7,000. Also, if older PCs can be re-used or duties on new computers can be reduced, that would lower the start-up costs by Rs 10,000 or more.

The monthly gap can thus be narrowed and even eliminated. Over time, as the villagers realise the benefits of the TeleInfoCentre, usage will increase. Also, as content developers and software companies realise the potential of the audience being created, additional revenue-generating services will get created. The aim should be to get the per capita income of the villagers to increase, since that will mean that they would be willing to spend some more money at the TeleInfoCentre.

The TeleInfoCentre should be the responsibility of a local entrepreneur. There should be no government subsidies in their set-up or operation. The role of the government should be that of an enabler, not a funder.

Tomorrow: TeleInfoCentre as a Business

TECH TALK Transforming Rural India+T

Published by

Rajesh Jain

An Entrepreneur based in Mumbai, India.