Why Telephones, Radio, and TVs Don’t Make The Conference Circuits

In late February, immediately upon my return from my brief trip to California, I went to attend what is called the Baramati Conference in Baramati. Baramati is a small town in Sharad Pawar’s constituency. The conference was on “Information Kiosks and Sustainability”. I sat through the presentations. After a while it gets mighty boring to hear about ICT-this and ICT-that and all the wonderful things that computers and the internet are going to do for development of poor people. My mind wanders when I get bored. So I sat there wondering what motivates these people who wish to push computers and internet as the solution to all problems. Why?

The banners all over the place proclaimed proudly the sponsors of the conference. Intel, Microsoft, HP, and a bunch of others. The makers of hammers promoting the notion that every problem is a nail and the best thing one can do is to stock up on hammers. Never mind that what you may really need is a bottle-opener and that a hammer on a bottle will result in a mess that you will have to pay to clean up.

When bored I also become cynical. Selling hardware is hard in a world that can barely afford decent square meals. Roping in NGOs to push hardware seems like an excellent marketing strategy and so these conferences get funded. Almost every presentation in these sort of meetings is about PCs and internet. There is practically zero mention of radio and TV. Radio and TV make more sense in a lot of contexts for developing countries. Telephones, radio, and TV (TRTV, henceforth) are orders of magnitude cheaper, easy to use, and in many aspects more robust than PCs. So what explains the neglect of TRTVs?

Two factors explain the neglect of TRTVs as a solution to the information and communications needs of the poor. First, the TVTR industry is fragmented compared to the industry for computers. The computer industry is a virtual monopoly of the Intel-Microsoft behemoths. Monopolists have market power and therefore they capture all the profits (or, rents) that are generated by increased demand for their products. Compared to the computer industry, the TRTV market is more competitive. No single entity there controls any significant part of the market, and therefore economic profits are non-existent. Consequently, no entity has an incentive to push TRTVs as a solution for the information and communications needs of the poor.

The second factor for the neglect of TRTV is that TRTVs deliver services that have public goods characteristics and have major positive externalities that cannot be captured by the firms in the market. The market therefore underprovides the amount of TRTV as would be predicted by economic theory.

The classical response to the second factor is of course to subsidize TRTVs so that the socially optimal quantity is delivered and consumed. The first factor can only be confronted by regulation. Courts have been routinely trying to break Microsoft’s monopoly in the US an Europe. Perhaps one of these days with a little bit of luck, the stranglehold will be broken.

India has to adopt the most cost-effective means of delivering information and education. Computers and the internet are an expensive solution that most of India cannot afford. The money available for subsidizing the information and communications solutions can be more efficiently used in the TVTR sector than the computer/internet sector. Is anyone paying attention?