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$25 Tablets, $2 Mobile Data Plans, and Zero Margins: How the Internet Is About to Gain Three Billion New Users

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Three billion people have everything they need to connect to the Internet -- except a suitable device.

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In India, cheap wireless connectivity is just as important as access to cheap hardware. Fortunately, deregulation and cutthroat competition among the country's wireless carriers means that's already available. Unlimited data plans for $2 a month are the norm, even though data speeds on India's 2G and 2.5G networks are significantly slower than in the US. (Datawind has invested heavily in creating a system that compresses Web pages before they are sent to its tablets, to reduce page loads from an agonizing 17 seconds on average to only three.)

Killing hardware margins could mean killing the tablet business of companies like Samsung, at least for low-end devices. But then how will Datawind make money? The same way Google (NASDAQ:GOOG) does when it sells tablets at cost: advertising.

All of the apps on the Aakash 2′s native app store will be free, because in India, there is hardly any access to online payment systems, and especially not for the poorest. "Today, 70% of the country doesn't even have a bank account," says Tuli. "If they want to buy an upgraded version of Angry Birds, they can't do it, no matter how cheap it is."

India has a thriving advertising market, says Tuli, and the evidence is its plethora of print media and cable channels. Datawind will put ads on developers' apps, and split the ad revenue with them; that way, no money ever has to be extracted from the tablet's owner after the initial purchase.

And India is a market in which cheap, Internet-connected tablets in the hands of people who have never had them before could lead to all kinds of interesting apps. He shows off one example, an app being developed by university students that is designed to create a point of sale ledger for India's tens of millions of fruit sellers.

But becoming the Apple (NASDAQ:AAPL) of India, whatever that would mean, hardly seems to be Tuli's goal. For example, Datawind recently lost out on a contract to supply its tablets to the government of Thailand, after flooding in that country wiped out its budget for the devices. The Chinese government responded to the disaster by providing tablets for free, but they were of course made by a Chinese manufacturer.
"At the end of the day I don't have to win every contract," says Tuli. "If, at the bottom of my heart, I know that I helped seed that idea, the impact that has is a lot more powerful than, 'OK, I could have made some nice money on it.'"

India has 360 million children, but only 220 million are in school, says Tuli. For those 220 million, a tablet that costs only about three times more than shipping a year's worth of books to a remote Indian school makes sense. For the same reasons, Tuli thinks it will make sense in Bangladesh, Turkey, Greece, and other countries with whose leaders Tuli has met. In any country in which the quality of education drops as you journey to schools that are farther from major metropolitan centers, which is nearly every country on earth, Tuli believes that tablets, and especially Internet access, can have a significant impact on kids by supplementing their education.

This story by Christopher Mims originally appeared on Quartz.

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