BRIDGING THE RURAL DIGITAL DIVIDE

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2 )'*) +',' + /: / :; / - 2 ) ( $ < = > <4 $ > $ >,7 6* 7 /,7 0 >?,+?,.2,+2,. $-./$' % TARAhaat plans to have over 3,000 kiosks within 3 years in North India before expanding into other regions. TARAhaat is targeting villages and towns in India with populations of less than 500,000 and does not plan to establish a presence in larger cities, which still leaves TARAhaat with an aggregate market of 945 million people. The company has segmented this market into five different habitats: cities (pop. below 500,000 50,000), block towns (pop. 15,000-50,000), large villages (pop 5,000-15,000), medium villages (pop 2,000-5,000), and small villages (pop < 2,000). Each TARAkendra will cover a five-kilometre radius area and, depending on the habitat type, may serve several small villages or only a portion of a larger peri-urban market. Projected user penetration rates within each area are based on a number of factors, including local demographics such as age, education level, and buying power, distance to other kendras, and availability of services that may substitute for those offered at TARAkendras. The table below shows TARAhaat s kendra roll-out schedule and projected user volumes. *'+).') (. ') ' <5?3, / 7

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8 )'*) +',' + *'&+/ &'$ = 5 The local availability of computer and Internet access has spurred many parents to allow their daughters to avail themselves of the benefits of these new mediums of information and education. The success of this programme can be measured by the ratio of male to female students. When TARAhaat started the ratio of males was four times that of females. Today the mix has been successfully shifted to 3:2 TARA Akshar will be rapidly scaled up during 2006 and its reach leveraged through mobilizing other civil society organizations to use the product to eradicate illiteracy in their communities. Rural children at the TARAkendra seemed to be more confident about their future prospects as a result of their newfound computer literacy. The introduction of the Ask the Expert service has given local farmers access to information which enables them to improve their decision-making ability, increasing their financial returns and disposable income The programmes being introduced in early 2006 to develop rural entrepreneurs will also benefit the rural economy in the areas served. Business Benefits A wide range of services ensures multiple revenue streams for the franchisee. Customers pay a fair and affordable price for services. The financial viability and growth of the business is ensured as the bulk of the profits reside with the local franchisee. TARAhaat uses its share of the franchise revenues for the continuous development of new services. A robust training and support structure helps ensure the operational success of franchisees. Challenges 0 -C TARAhaat provides extensive support for its franchisees, including assistance with financing, Internet connections, business and IT training, and marketing. Nonetheless, the lack of literacy among many of its intended customers poses continuing challenges to its business strategy. A

9 )'*) +',' + C India's telecom regulatory policies are improving, but fall short of fully open competition. As a result, prices are relatively high and service is generally quite poor, especially in rural areas. Since TARAhaat is largely dependent on commercially available infrastructure, this poses a substantial challenge to the venture. CTARAhaat's association with Development Alternatives brings a wealth of rural expertise and a resilient attitude towards overcoming all hurdles. However, the venture has substantial financing needs and faces long-term challenges relating to product development and franchise operations that still await resolution. Key Lessons TARAhaat's services demonstrate the venture's social benefits, including empowering the education of girls, inspiring confidence and higher aspirations among rural children, and enabling farmers to gain market information and substantially higher prices for their crops. The staying power of TARAhaat's business model is not yet proven, but the positive customer response is an early indication of viability. The venture's franchise model seems likely to harness local entrepreneurial energies to the benefit of both. Its emphasis on locally relevant content, in local languages, and strong orientation to product development based on customer feedback is also an important characteristic, one that takes advantage of India's large rural middle class. Finally, the company combines both commercial and NGO characteristics, potentially giving it an advantage in pioneering the relatively risky Internet market in rural India. --'. '-'..7 - ) ' $7 $, / / / -. ) ' $..'-9 4 J/ %

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