at last development shows the way to the private sector (sort of)!

 Per the NY Times article "In Developing Countries, Web Grows Without Profit," it's tough to "achieve sustainability" when you don't charge for your services:

"Last year, Veoh, a video-sharing site operated from San Diego, decided to block its service from users in Africa, Asia, Latin America and Eastern Europe, citing the dim prospects of making money and the high cost of delivering video there."

The problem is that the biggest online media-sharing sites--YouTube, Facebook, MySpace--and their smaller wannabees have based their business models on the free distribution of bandwidth-intensive media, with revenues derived from bundled ads. In developing countries, demand for videos and music is enormous while bandwidth is in short supply, forcing the companies like YouTube to cowboy up more servers to provide something like the high-quality streaming that users experience in high-bandwidth countries (and even in the Mbps-challenged US).

Now, after years and millions in venture capital, the trouble with not building revenues (or "sustainability," in development-speak) from the get-go into your plan for poor countries has become apparent: If users can get the service for free, the demand curve can be nearly vertical; if there are optional costs, they'll be declined by almost everyone; and if you find that you can't keep funding the provision of free services, well, you're talking about our discretionary cash, and we'd rather spend it somewhere else.

The problem, though, centers on the fact that getting really, really big is what those business plans are all about:

"Internet start-ups that came of age during the Web 2.0 era, roughly from 2004 to the beginning of the recession at the end of 2007, generally subscribed to a widely accepted blueprint: build huge global audiences with a free service, and let advertising pay the bills."

What that means (although it's not put forth in the article) is that MySpace, Facebook and YouTube are locked in a kind of death spiral of expansion: They're all living on investors' capital because they're not profitable, and they're each hoping to outgrow and outlast the other two, so becoming the single global go-to option for free streamed stuff. (Remember, Google owns YouTube, Microsoft owns some chunk (5%?) of Facebook, and Rupert Murdoch owns MySpace--these apples have basically rolled themselves toward appropriate trees.) So if any of these three sites flinches and stops providing free media to Internet users in the global south, that company's investor-funded dreams of global presence drop off the table, and subsequent injections of funding become much less impressive. (Note that the problem isn't that users in developing countries aren't buying things, over the Internet or otherwise. it's that advertisers know that most of them can't or won't buy--little money, and no credit card--and so aren't buying click-through ads from the Big Three of Media that target those countries.)

Veoh, a smaller company, is blocking access to developing-country users to control costs. The Big Three can't do that, based on the above-mentioned death-spiral, so they're exploring other options: MySpace — the News Corporation’s social network with 130 million members, about 45 percent of them overseas — is testing a feature for countries with slower Internet connections called Profile Lite. It's a stripped-down version of the site that is less expensive to display because it requires less bandwidth.

Meanwhile, in San Bruno, California (just a jump up 101 from Google in Mountain View):

"YouTube has slowed the creation of new international hubs and shifted its focus to making money. [Tom Pickett, director of online sales] says that does not rule out restricting bandwidth in certain countries as a way to control costs — essentially making YouTube a slower, lower-quality viewing experience in the developing world."

Facebook is also apparently considering ways to cut costs that don't require user payments. These activities can be grouped in 3 strategies: blocking access to users in countries where most people are too poor to attract advertising (Veoh); cutting back the quality of service in entire countries (YouTube); or creating a two-tier system that lets individual users pay for higher-quality service (MySpace and possibly Facebook). The ever-so-slight irony is that the development banks, foundations and NGOs, those supreme practitioners of the unsustainable giveaway, cottoned on years ago to the near-impossibility of shifting from free-access to revenue-generating models in mid-project. A bunch of donor-funded services remain free (education in poor countries is sometimes completely funded by donors), but agencies and organizations have learned, to a degree at least, to avoid starting projects that will require ongoing injections of funds (like ad-free streaming of media over the Internet) if the model involves providing services free at the start. And so, another vision of the global commons founders on the reality of cost:

Web entrepreneurs like Mr. Shapiro of Veoh, still struggling with his decision to restrict his site from much of the world, might have to find a way to soothe their battered consciences.“The part of me that wants to change the world says, ‘This is unfair, it shouldn’t be like this,’ ” Mr. Shapiro said. “On the other hand, from the business side of things, serving videos to the entire world is just not supportable at this time.”