It is, as press release put it, “one of the most remote inhabited places on earth.” Parintins, Brazil, is on the outskirts of nowhere. The closest highway ends in óbidos, a day or two downriver. So in 2006, when Intel wirelessly connected the Amazon city to the rest of the online world, chairman Craig Barrett promised that the venture would “bring the expertise of specialists, sophisticated medical imaging, and the world’s libraries to a community reachable only by airplane or boat.”
The city’s “digital makeover” was widely reported, publicizing Intel’s billion-dollar, five-year World Ahead Program. The message: Intel is doing good, improving the health and education of the poor around the globe. But Intel’s corporate benevolence is also a shrewd investment. Revenue from the United States and Europe has been declining, so the company is nurturing its next crop of customers in Parintins and nearly 200 other places in the developing world. The World Ahead Program is very much about building Intel’s future markets.
Parintins, it turns out, is not the heart of darkness. With some 100,000 residents–about as many as Burbank, California, or South Bend, Indiana–it is the second-most-populous municipality in Brazil’s largest state. Residents use computers and cell phones, and the city’s young people have been texting one another and posting pictures of themselves online for years. Understanding what Intel is up to there illuminates exactly what the company is getting–and seeking to get–for its $1 billion. As with so much corporate responsibility, it is a fine example of enlightened self-interest.
“We’re not a charitable organization,” says Barrett. Sitting in the lobby of the United Nations’ General Assembly building in New York, he looks like one of the numerous diplomats. The 68-year-old former Stanford University associate professor heads a UN task force that promotes digital technology for the global poor, and he had just appeared at an event promoting broadband communications in Africa.
Inside Intel, Barrett is seen as a supporter of World Ahead. He is refreshingly candid about just what the program is after. Intel is not, after all, putting its money into the globe’s least-developed nations–it’s active in Mexico but not in Malawi, in Nigeria but not in Niger. Explains Barrett: “We’re trying to foster the continued growth of our products.”
Today, more than half of Intel’s revenues come from the less-developed countries in Asia and the Americas, up from less than a fifth a decade ago. The company has moved most of its component assembly and testing to the developing world; its research is also increasingly taking place there. Half of the global middle class lives in the developing world today. Within 25 years, that figure will be 90%, according to the World Bank’s latest forecast. That will more than double, to 1 billion, the number of potential buyers for products that today are considered luxuries, including not only cars and refrigerators but also computers.
“We’re taking this tier by tier by tier,” Barrett says. In other words, Intel is pursuing not the so-called bottom of the pyramid, or BOP–the billions of people who live on a few dollars a day or less–but the next billion, consumers who rank economically just below those it serves today. The World Ahead Program, which reports to Intel’s sales and marketing team, has an average of $200 million a year in funding–equivalent to 10% of Intel’s corporate advertising budget. Barrett notes, “If we just advertised, we’d probably just reach the users who already know us and already use our products.”
Intel’s immediate goal is to win over governments whose purchasing and policy decisions could drive the company’s business forward. World Ahead operates primarily in industrializing and resource-rich economies–in Brazil, India, China, and South Africa, as well as in smaller but fast-growing markets such as Vietnam and Pakistan.
“The various ministers and presidents always ask Intel to build a plant in their country to create jobs,” says a former Intel senior executive. “That is obviously not possible, at least not in every country around the world. So the Intel execs give an answer along the lines of, ‘We understand your desire to join the digital revolution, and we are going to do even better than building a plant. We are going to train your teachers in the use of technology.'” That, says the former exec, means “more good PR at a reasonable cost.”
Intel went wireless in Parintins in September 2006. A 300-foot tower rises like a scepter over the city, holding aloft the antenna for a microwave link that connects Intel’s local sites with a satellite dish that, in turn, connects to the Internet. The link runs on WiMAX, a wireless technology that carries information more rapidly than Wi-Fi and for longer distances. Through World Ahead, Intel has been promoting WiMAX in rural areas and emerging countries where telephone wires, television cable, optical fibers, and even cellular networks have been uneconomic. The company’s strategy is to create a WiMAX market that it can dominate. (Laptops with Intel WiMAX will hit stores this year.)
“The demonstration projects are a rip-off of the Nike slogan, ‘Just do it,'” says Barrett. “I’ve given presentations around the world about the latest broadband wireless technologies. People will say, ‘That’s very interesting,’ and go away. But if you do a demonstration like Parintins in their backyard, people take notice. And they start to say, ‘This is not theory. Look, it’s real. You can touch it.'”
Parintins was selected by Intel in the summer of 2006, shortly before Barrett was due to visit Brazil, Intel’s largest customer in Latin America. The company had five WiMAX pilot projects in urban areas such as Brasília, but the government was encouraging rural development. So Jim Whittaker, then Intel’s director of government and education affairs in Latin America, asked the World Ahead team to add a program in the Amazon.
José Bruzadin, manager of health-care projects for Intel Brazil, proposed that Parintins be the company’s first telemedicine venture in the country. Parintins was big enough to benefit from online communications, remote enough to present a logistical challenge, and famous enough to be a showcase for a nation with vast potential for wireless demand–the town’s annual Boi Bumbá, or festival of the ox, attracts tens of thousands of visitors. In the telemedicine project, specialized cameras would provide doctors and patients in the island city with access to specialists in São Paulo, especially cardiologists and dermatologists, a priority in an area where skin cancer is prevalent. Parintins mayor Frank Bi Garcia agreed to supply electricity, air-conditioning, and furniture for the project. “In Parintins, it looked like we could work well with the locals and would get good support,” says Elaine Nucci, market-development manager for Intel Brazil. “You can’t put technology out there if people aren’t prepared to take advantage of it.
The World Ahead crew also set up computer labs in two of the city’s poorest schools, providing 84 PCs, and lined up other donors.supplied the router and switches, and Proxim contributed specialized radios based on Intel circuits. Embratel, the owner of Brazil’s only nationwide license for the essential radio spectrum, donated use of the tower; CPqD, a leading Brazilian systems integrator, handled planning and implementation; and educational materials came from Bradesco Foundation, an affiliate of Brazil’s second-largest private bank.
The market for computers in Brazilian schools could reach 50 million machines, and Intel isn’t about to concede it, even to such a noble endeavor as the One Laptop Per Child Foundation. While OLPC was still developing its design, Intel–perhaps channeling its famously aggressive former CEO, Andy Grove–quickly developed competitive machines and began selling them in partnership with local companies, an important consideration for many government purchases. After Intel dismissed OLPC’s computer as a “gadget,” OLPC founder Nicholas Negroponte accused the company of trying to destroy a humanitarian mission because its computer used microprocessors from rival Advanced Micro Devices. Intel has since joined the OLPC board–in April, the company will announce a microprocessor for a new iteration of the OLPC computer–but it continues to compete. Intel’s low-cost Classmate PC is being made in Brazil by Positivo Informática, which supplies PCs and related products and services to 8,900 schools in the country; the PCs Intel bought for Parintins came from Positivo. (OLPC laptops are made in Taiwan.)
Intel is not the only U.S.-based multinational promoting itself in Parintins.has spent $25 million to sponsor Boi Bumbá for 13 years–and to publicize Kuat, its high-caffeine soda. But Intel is in Parintins to demonstrate the usefulness of products that few of the local residents can buy today. In the first half of last year, 14 teachers and 60 tutors learned how to use computers in planning lessons, gathering course materials, and classroom teaching; 208 students acquired basic computer skills and learned how to browse the Internet. Local physicians at a community clinic consult with specialists three times a week. “It’s nothing earth shattering,” says Mateja de Leonni Stanonik, vice president of the International e-Hospital Foundation, who visited the clinic last summer. “But to have something like this in the Amazon is quite important.” So far, says Carlos Luzzi, manager of corporate affairs for Intel Brazil, “the health-care center is doing 8 on a scale of 10,” while the schools are at five or six.
Hardly the hyperbolic digital makeover of Intel’s initial press release. “These kids now have a little more opportunity than they did before,” Barrett says, “and we’re seeding the forest for the next billion trees.” Not to mention the next billion customers.
Richard Shaffer writes about technology and economics from New York.