Mobile Policy And Mobile Commerce

Mobile Policy and Mobile Commerce Gireesh Shrimali, ISB Introduction The total number of mobile phone subscribers in the world was estimated at 4 billion in August 2008. Around 80% of world's population has mobile phone coverage as of 2006. This figure is expected to increase to 90% by the year 2010. On a numerical basis, India is the biggest growth market adding about 7 million subscribers every month. With 305 million subscribers, tele-density in the country is still low and the country expects to reach 500 million subscribers by the end of 2010. Current projections suggest that within just a few years more people will be accessing the Internet from mobile phones than from PCs, especially as the latest 3G technology achieves deeper penetration. This trend is particularly visible in Europe and Asia. For instance, NTT DoCoMo's i-Mode portal has reached 48 million users in June 2008, with over 100 thousand Internet sites. M-commerce is about the explosion of applications and services that will become accessible from Internet-enabled mobile devices. It involves new technologies, services and business models. It is quite different from "traditional" e-commerce. Mobile phones or PDAs impose very different constraints than desktop computers. But they also open the door to a slew of new applications and services for consumers and enterprises, which will likely start generating tens of billions of dollars a year in revenue within the next few years.

Objective The objective of this course is to introduce participants to the new applications, services and business models of m-commerce: it examines the strategic and operational factors behind the successes, failures, and challenges of m-commerce initiatives by focusing on representative examples such as mobile portals, mobile banking/payment, and mobile marketing/advertising. The course also discusses the implications of telecommunications policy and regulation, in particular the controversial subject of 3G wireless spectrum auctions, with focus on the Indian telecommunications industry.

Structure The course will be structured as a combination of activities • Lectures to build a base of conceptual knowledge • Discussion of business cases, examples and illustrations The course is expected to be interactive and, in order for students to participate effectively, they must have read the materials in advance whenever applicable. Students should freely share their prior experiences that reinforce specific points being made or disagree with conceptual material.

Grading The grading for this course will include of • Class participation (25%): Students are expected to read up the cases and supporting material in advance, and participate in class discussion in a meaningful manner. Some students may be called upon to comment on specific issues at any stage of the discussion, and declining to comment may adversely affect the grade. • Individual assignments (45%): There will be three assignments evenly distributed through the course. These assignments are essentially the discussion questions for Classes 3, 5, and 8. The assignments (hard copies only) are due at the beginning of the corresponding class and should be deposited in the drop box allocated to the course. • Group project (30%): The project would be one of the following in the mobile telecom and mobile commerce sectors: (a) an analysis of the value proposition of a not-covered-in-class venture; (b) an analysis of a (or well defined part of) sector; (c) a business plan for a new venture. The students are expected to work in teams of 3-4. The teams are expected to form early on and work on the project through the term, with focused effort in the second half. We will have brief endof-term presentations on these projects. The project reports (soft copies only) are due by midnight on Wednesday, December 24.

Other Requirements • • •

There are no prerequisites No software is required There are no required text books

Attendance Policy (ISB Default) If you miss three sessions, you will obtain one letter grade lower than what you would have otherwise received. If four sessions are missed, you will receive a letter grade that is two levels lower, and if 5 sessions or more are missed, you will receive an F grade for the course. The following instances may also be treated as absences unless permission is taken from the faculty: • Attending only part of a session, either entering or leaving during a break, or, in general, arriving late or leaving early. • Failing to display your name card or not sitting in your assigned seat Remember to take the faculty’s permission in advance for any absences whether excused or otherwise (extreme illness – supported by a medical certificate, or personal bereavement).

Handouts Handouts will be posted on blackboard during the course of the class.

Course Outline Class 1 (Tuesday, November 25): Introduction and Wireless Technology Required Reading • Amagansett Funds (A)-(D) (HBS case) Additional Reading (hard copies will be made available at LRC) • Navigating the Alphabet Soup: Wireless Technology and Applications Primer Discussion Questions 1. List the major problems with the current CRM system at Amagansett Funds. Identify root causes for the same. 2. Arnoud and Nedra are contemplating the deployment of Treo phones among the wholesalers to supplement and improve the CRM system. Details of these phones may be found at http://www.palm.com/us/products/smartphones/treo750/. Explain how deployment of these phones would solve the problems above? 3. How would the Treo-based system actually work? You don’t need to know every abbreviation that would apply. But you need to provide enough conceptual structure: it should be possible to walk through the sequence of tasks that would be performed from your answer. To focus your answer, concentrate on the following question. What features would the phone need to have for the benefits identified in #2 to be obtained, and how would the interaction between the phones and the existing CRM system take place so that these features can be realized? In answering this question, it would be helpful to draw a diagram illustrating the flow of information in a system that includes both the phones and the CRM system. 4. Although the phones are intended to overcome current problems with the CRM system at Amagansett, they may provide value to the business beyond this. Identify the additional ways in which the phones would add value at Amagansett and classify them using the framework used in class. Class 2 (Friday, November 28): Telecommunications Policy and Regulation Required Reading • Lucent in India (Ivey case) • Indian National Telecom Policies 1994 and 1999 Additional Reading (on Blackboard) • Petrazzini B. A., “Telecommunications policy in India: the political underpinnings of reform”, Telecommunications Policy, Vol. 20, No. 1, pp 39-51, 1996 • Malik P., “Indian Telecommunications Policy and Regulation: Impact on Investment and Market Structure”, WDR Discussion Paper 0304. Discussion Questions 1. What should the objectives of government telecommunications policy be? Why? 2. Evaluate the Indian National Telecom Policies.

a. Critically examine the objectives and features of the Indian National Telecom Policy in 1994. Did it achieve its’ objectives? Why and why not? b. Critically examine the objectives and features of the Indian National Telecom Policy in 1999. Did it achieve its’ objectives? In particular, did it fix the failures of the 1994 policy? Why and why not? 3. Why did Lucent decide to enter India? What were the challenges to entry? Given the challenges, how did it enter and why? Class 3 (Tuesday, December 2): The Indian Telecom Sector Required Reading • Bharti Tele-Ventures (HBS case) Additional Reading (on Blackboard) • CRISIL Research, “State of the Industry”, November 2007. Discussion Questions 1. Why did Bharti become so successful? What are the key competitive advantages that Bharti has developed over time? How can an entrepreneur with limited access to capital, in a capital scarce country, succeed in a capital-intensive industry? 2. Should Bharti worry about entry by the much larger Reliance and Tata Group into mobile telephony? Is Bharti well positioned to succeed in mobile telephony in India in the long-run? 3. How should Bharti evolve its business model to deal with future opportunities and threats? 4. Do you think that the current telecom industry structure is sustainable in the long run? Why and why not? Student Presentations: Three 15-minute presentations from students. Each presentation should focus on a (major) telecom provider (other than Bharti) in India, and discuss its history, strengths, weaknesses and future strategy. Class 4 (Thursday, December 4): Auctions (Theory) Required Reading • None Additional Reading (on Blackboard) • Milgrom P., “Auctions and Bidding: A Primer”, Journal of Economic Perspectives, Volume 3, Issue 2, 3-22. • Cramton P., “Spectrum Auctions”, Handbook of Telecommunications Economics, Chapter 14, 605-638, 2002. Discussion Questions • None Class 5 (Friday, December 5, 5-7pm): Auctions (Practice) Required Reading

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Komia and the 3G Wireless Phone Auction in Poland (A) (HBS case) Bharti Cellular Limited (A) (IIMA case, handed out in previous class)

Additional Reading (on Blackboard) • Prat A., Valletti T., “Spectrum Auctions vs. Beauty Contests: Costs and Benefits”, Working paper, 2000. • Jain R. S., “Spectrum auctions in India: lessons from experience”, Telecom Policy 25 (2001), 671-688. Discussion Questions 1. What do you think is the most efficient method for governments to allocate scarce technological resource? 2. Regardless of the price of the license, how attractive is 3G in Poland for Komia? 3. What are the consequences for Komia of the method chosen by the government to allocate the 3G licenses? It may help to consider the following questions. How is the price of a 3G license set? Can Komia afford the 3G license? What are the strategies of various parties (e.g., the government, the incumbents, and the new entrants) involved and possible actions (and consequences) for each? 4. What should Komia do next? 5. What should Bharti bid for the Calcutta license? What factors influence the bid and why? State all the assumptions clearly and justify your analysis using the free cash flow (FCF) approach. Finally, how would the valuation change if there is +/10% uncertainty involved in market growth, CAPEX, and ARPU numbers? Does the average of these bid values come out to be the same as the bid using the average values of parameters? Class 6 (Tuesday, December 9): A (Successful) Mobile Portal Required Reading • i-Mode: NTT DoCoMo’s Wireless Data Service (HBS case) Additional Reading (on Blackboard) • NTT DoCoMo and Its i-Mode Success: Origins and Implications (HBS CMR article) • NTT DoCoMo and M-Commerce: A Case Study in Market Expansion and Global Strategy (Thunderbird case study) Discussion Questions 1. What is different about M-commerce? In particular, what is special about mobile devices that will not only enable new services but also pose challenges in developing these services? 2. What were the key business factors/decisions, technology choices, and country specific factors behind i-Mode’s success and why? 3. What were the key challenges for DoCoMo moving forward, both in Japan as well as globally? What would be your recommendations for DoCoMo?

4. Will wireless services take off outside Japan? In particular, what do you see as the main issues that may impede widespread adoption of wireless services worldwide? Speaker: Abhijit Bose, VP, Ngpay Class 7 (Thursday, December 11): Mobile Commerce Value Chain Required Reading • None Additional Reading • Michael Porter, “Competitive Advantage: Creating and Sustaining Superior Performance”, Chapter 2, Free Press, 1988. Speaker: Rajat Jain, CEO, Mobile2Win Class 8 (Thursday, December 18): Mobile Banking and Payment Required Reading • Canadian Imperial Bank of Commerce Wireless Strategy (Ivey case) • Paybox.net: Mobilizing mCommerce (HBS case) Additional Reading (on Blackboard) • Tiwari R. and Buse S., “The Mobile Commerce Prospects: A Strategic Analysis of Opportunities in the Banking Sector”, Chapters 3 & 8, Hamburg University Press, 2007. • Shrimali G., “Introduction to Security”, class notes. Discussion Questions 1. What are banks’ objectives in pursuing a strong mobile presence? 2. What should be CIBC’s wireless technology strategy and why? It would help to consider the following questions. What components should CIBC’s wireless technology portfolio include? What are the options available in each? What are the advantages/disadvantages of these options? 3. How important are micro-payment systems to mobile commerce? When (and why) would a customer choose to pay through a mobile device instead of other means (e.g., credit card or merchant account)? 4. How do mobile payment solutions create value for various players? What are the impediments to the wholesale adoption of mobile payment solutions? 5. What are the advantages of Paybox in the mobile payment market? What are the impediments to the continued success of Paybox (beyond the issues faced by mobile payment itself)? 6. As Entemann, what strategy would you propose going forward? Class 9 (Friday, December 19): Mobile Marketing and Advertising Required Reading • The Brand in the Hand: Mobile Marketing at Adidas (HBS case)

Additional Reading (on Blackboard) • How to Market to Generation M(obile) (HBS SMR article) • Good Call (HBS Strategy&Innovation article) Discussion Questions 1. What is adidas’ position in the athletic shoe market? How does the brand seem to be doing in this market? 2. What evidence does adidas have that suggests the importance and potential success of digital interactive and mobile marketing? 3. What is the Brand in the Hand concept? What does this mean to adidas and its branding efforts? 4. Is MMC just a novel approach to marketing communications and a marketing fad (it is merely communicating the same message in a new format)? To what extent should it play a part of overall marketing communications strategy at adidas or at other firms competing in different industries in the future? 5. What were the objectives of the Missy Elliott (ME) campaign in the US? Why did adidas choose to center the campaign based on Elliot? Do you think this campaign would be successful in the US? Class 10 (Tuesday, December 23): In Class Project Presentations