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Microsoft Introduces Prepaid Computing

Jason Lee Miller
Staff Writer
Published: 2006-05-22

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After a year-long trial in Brazil, Microsoft officially unwrapped its FlexGo technology, which makes purchasing Windows-based PCs more affordable, if limited. Microsoft based the pay-as-you-go system on prepaid mobile phones, which are immensely popular in countries where income is sporadic and consumer credit is inaccessible.

The program may seem to some an answer to MIT's One Laptop Per Child Program, an initiative criticized by Bill Gates for not reaching developing nations in the right way. That criticism wasn't received warmly as open-sourcers immediately sensed that opposition to the Linux-based $100 laptops served Microsoft's interests more than developing nations. The company's new "Pay-As-You-Go" business strategy for emerging markets may further undercut MIT's project through a simple business model that is profitable and beneficial to lower-income users.

Of course, Microsoft's target is already somewhat beyond the need for hand-cranked power and piggyback wireless mesh networks, but it's one way to ensure that a whole generation of poorer computer users doesn't grow up with a crush on Linux.

The concept is simple. Customers, who normally couldn't afford to buy a computer and who are unable to finance the equipment, can make a small down payment and take it home. Access to the computer is based on purchases of time credited on prepaid cards or through a monthly subscription. Over time, money paid to use the computer builds up and the customer can own it fully.

"Microsoft FlexGo will be revolutionary for us in the way we sell and finance PCs by making this new flexible pay-as-you-go model possible. Our lower-income customers are excited to finally buy their first PC with minimal upfront investment, paying for time as they need it, and owning a computer with superior features and genuine software," said Frederico Trajano, sales and marketing director for Brazilian-based Magazine Luiza.

FlexGo informs customers of time used and shows them how to add more hours by typing in a number from the prepaid card. If time is not added, the PC moves into a "reserve tank" or limited-access state until more time is purchased online or at local vendors. Microsoft estimates that the pay-as-you-go model reduces entry costs of PC ownership of 50 percent or more.

Over a billion prepaid mobile phones used around the world was an indicator of the success of and familiarity with the model, says Will Pool, senior vice president of the Market Expansion Group at Microsoft. The company teamed up with Brazilian retailer Magazine Luiza, Advanced Micro Devices Inc. (AMD), HSBC Bank Brasil S.A., Infineon Technologies AG, Intel Corporation, Lenovo, Phoenix Technologies Ltd., and Transmeta Corp. for the next round of trials in Brazil, China, Hungary, India, Mexico, Russia, Slovenia and Vietnam.

Also, Microsoft is working with International Finacne Corp. (the private-sector investment arm of the World Bank Group) to explore ways to enable its financial partners to underwrite PC purchases and prepaid cards for lower-income customers.

"Technology will be one of the biggest factors as developing countries strive to make their mark in the global economy," said Professor Ashok Jhunjhunwala of the Indian Institute of Technology in Madras. "Access to personal computers will help educate our children, keep our small businesses running and strengthen our local economies."

Along with the FlexGo model, Microsoft has been working with major telecommunication companies in developing nations to offer subscription computing with broadband access. Over the next few months, the company will roll out subscription PCs in conjunction with Videsh Sanchar Nigam Ltd. (VSNL) (India), T-Com (Hungary), Vietnam Datacommunication Co. (VDC) (Vietnam), SiOL doo (Slovenia) and Telefonica Brazil (Brazil).


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About the Author:
Jason L. Miller is a staff writer for WebProNews covering technology and business.

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