Bringing the benefits of ICT to rural populations is
a commendable goal. The use of kiosks with connected
PCs for bringing services to villages is a model worth
considering among various means. The advantages of
kiosks are many. Primary advantage is that of proximity.
Villagers do not have to incur any travel cost to obtain
the services delivered. Next, the investment required
is relatively small and so a start can be made with
limited resources. Finally, rural entrepreneurship can
be motivated by giving over the management of the kiosk
to a person from the village itself.
Disadvantages of Kiosks
The primary disadvantage of kioks is that they are
not economically viable. Economic viability is related
to economies of scale, both on the supply side and
the demand side. Scale economies depend on the quantity
of services supplied and demanded. Rural populations
have a low ability to pay for services. Given the average
village population of about 1,000, the aggregate demand
for services is low. The quantity of services that need
to be supplied is commensurately low. This makes the
average cost of per unit of any service delivered high
and the break-even price is therefore high. Sometimes
the price is sufficiently high that the service cannot
be provided at all at full cost.
The High Cost of Providing Services at the Village Level
Rural India is highly fragmented with around 600,000
villages with an aggregate 600 million people. The lack
of basic infrastructure such as power, roads, and
connectivity increase the cost of providing services
to villages. For instance, while the cost of a PC in
a village is the same as that in an urban area (around
Rs 20,000), the total cost of ownership of a PC in
rural areas is far higher compared to that in an urban
area because providing for uninterrupted power for the
PC is about Rs 30,000.
The essential point is that high technology sophisticated
equipment require deep back-end infrastructure and
creating this deep back-end infrastructure at the 600,000
villages is prohibitively expensive.
Subsidies are one way around the problem of pricing at
full cost. If a kiosk requires only a modest subsidy of
Rs 10,000 per year for it to be economically viable, the
aggregate annual subsidy required for kiosks in 600,000
villages is around Rs 6 billion (about US$ 136 million).
Clearly, this level of annual subsidy is not sustainable.
Obtaining Scale Economies
To bring down the average cost of delivering services,
and consequently reduce the full-cost price of the services,
economies of scale have to be obtained. That is, a much
smaller number — something of the order of 10,000 rather
than 600,000 — of significantly large-sized kiosks have
to be considered. Let’s call these “Super Kiosks”. If a
typical village-level kiosk has two PCs, a Super Kiosk would
have 10 PCs and deliver a much wider range of services and
to a greater aggregate population. Imagine that a Super
Kiosk (SK) is located in a largish village and serves the
populations of the neighboring 10 villages for an aggregate
population of about 10,000.
To fully saturate rural India, only 70,000 Super Kiosks would
be required instead of 600,000 kiosks. Further, it can be
argued that the economics of SKs will eliminate the need for
subsidies because of aggregation economies on the supply side
and the demand side.
Disadvantages of Super Kiosks
The primary disadvantage of a SK is that it is not available
at each village. The majority of the villages will not have
an SK. Some travel cost will have to be incurred by the majority
of villagers to obtain the services of an SK. However, this cost
is relatively minor because the average distance to an SK will
be about 2 kilometers which can be easily covered within a half
hour by foot.
Advantage of Super Kiosks
It can be argued that Super Kiosks have the advantage of scale
economies and that is why they are better than kiosks in
villages. But there is an even more fundamental reason for
them. Rural India is dispersed among 600,000 villages. No
economy can develop with such a large number of very small
aggregation of people. For India to develop, the dispersal
of rural populations has to reduce to something like 60,000
“Super Village” (SV) with an average of 10,000 population.
SV must be in the future of rural India in the medium term
of five to 10 years. I see the progression of rural India
from 600,000 villages of 1,000 population average, to
60,000 SV of 10,000 population, to 6,000 “Mini Towns” (MT) of
100,000 average population in the long term.
The transition of rural India from villages to SVs to MTs
has to be helped along. The introduction of SKs in specific
villages will be the first step. That is where the game
will be in the future and that is where we must aim to be.
(When asked what was the secret of his success, Wayne
Gretsky, the hockey legend said that he plays for not where
the puck is, but where the puck is going to be.)
RISC: Rural Infrastructure and Services Commons
I proposed a model for rural economic development which
some have described as a kiosk on steroids.
The concept paper for RISC (which is co-authored with
Vinod Khosla) is available
here. You can consider RISC to be a Mega Kiosk
and I hope that one of these days it will be implemented.
Like they say, one lives on hope and dies of despair.