On platforms: A marraige between social networks and online auctions!

Have been discovering the wonders of Facebook recently (http://www.facebook.com/profile.php?id=699296175) and am amazed by it's ability to serve as a platform. Case in point is Mosoma, an online auction application that sits on the underlying social network. My colleagues Arun Sundararajan (NYU Stern) and Alok Gupta (Carlson School, U Minnesota) conceptualized such a platform about a year ago, but being what we are - academics - never got around to implementing the theoretical idea. The key benefit of such a platform is that it uses social capital to build trust in otherwise anonymous e-markets.

This aspect is of particular importance in emerging markets such as China and India. Given eBay's struggles in China, and it's not exactly lighting it up here in India, innovative models such as Mosoma will mesh well with the Asian mindset.

Now, if only we can get Broadband penetration to grow at 1/10th of our mobile growth rate (in India:-)

Weekend Trip to the Tech Triangle

This was certainly not my average weekend. Had the pleasure of accompanying Ajit and Savita on the road, talking to ISB alums and prospects on Saturday in Bangalore and Sunday in Chennai. It is great to see the passion for the institute continuing and hope that we can find more ways to connect with the alumni on an ongoing basis. How about everybody getting on Facebook?

Also, used the opportunity to give my 3G talk in what can only be categorized as "two different worlds." On Friday, Alok Goel and Jagjit Chawla (ISB 2007) invited me over to the Google's Infantry Road office in Bangalore. In between medicine balls, lava lamps and a lot of food, we discussed what it will take to get India's wireless information infrastructure up and running. On Monday, got the opportunity to revisiting the 3G issue in the hallowed, (what should be) rosewood paneled halls of The Hindu on Mount Road (Anna Salai) in Chennai. An interesting issue raised by Business Line joint editor Venu is the possibility of having dynamic allocation of 3G spectrum in a spot market. Apparently, this is at the heart of Google's recent proposal to the FCC. Have to dig into this.

Seems like everyone is eager to see what the group of ministers is going to come up with. Will chime in next week on that issue.

RB.

p.s. Note on the title of this blog. Have grown up hearing about the North Indian Golden Triangle (Jaipur, Agra and Delhi). Arguably, Hyderabad, Bangalore and Chennai, while not prime tourist attractions, represent the new technology centric heart of modern India. I must admit the Chennai surprised me on the hipness quotient. The Leather Bar at the Park Hotel is swanky and we even got turned down at an independent authentic-looking Thai restaurant for a Sunday evening dinner. Hyderabad has some catching up to do.

On how to roll out 3G in India?

Got the chance to dig into the previous posts question and more in detail at this podcast interview recorded in the leafy chambers of Knowledge@Wharton in Philly. My colleague, Arun Sundararajan from NYU Stern and I touched upon (among other things) how the Indian mobile market is already competitive enough and if new operators are to be allowed, under what conditions it makes sense.

You have to listen to us for now till the transcripts come out.

Part II of this interview shall roll out in the next India K@W issue on June 29.

Part of the fun that beautiful afternoon was that we also got to meet Mukul Pandya, Knowledge@Wharton's editor in chief. In his humble way, he told us how his "network" approach has led to a subscriber base of close to 1M. That's quite something for an online knowledge publication that is about a decade old.

Should new operators (foreign or not) be allowed to bid for the upcoming 3G specturm auction?

Seems like the 3G auction scenario (not to mention the Maran family feuding) is heating up again. Back in the early part of September I made a presentation to the TRAI on the benefits of using an auction over a beauty contest in India. The DoTs recommendations have indicated that they will open up the auction to new operators such as Singtel and NTT DoCoMo. Is this a good thing or a bad thing?

I have to admit I can't find a strong justification for the DoT's case. The only argument I can think in favor of the decision is that players like NTT DoCoMO may bring proven 3G technology and applications quicker to the public.

Arguments against;

1. Will further slow the roll-out as new operators will not be in a position to leverage existing economies of scale and reach -- the back of my envelope says that each new tower costs $100,000 capex and the country needs at least 30,000 more of these -- lots of zeroes:-)
2. Competition already exists as reflected in lowest mobile prices on the planet
3. This will over-heat the auctions which is unlikey to be well-designed in any case -- think big time winner's curse:-(

Your thoughts?

So it goes...farewell Kurt Vonnegut

For all those war mongerers, a final word from the now late author, playwright and poet Kurt Vonnegut;

Requiem

When the last living thing

has died on account of us,

how poetical it would be

if Earth could say,

in a voice floating up

perhaps

from the floor

of the Grand Canyon,

“It is done.”

People did not like it here.

The NY Times carries an obituary

Custom Labels in Excel's X-Y Scatter Plots--Phew!

Courtesy of ISB MBA student Prem Pasupathy (many thanks Prem! I've struggled with this significantly....)

Dear Professor,

I did some research on assigning a custom data label to data points in XY Scatter Graph. What I found was that it is possible to change the default label given by xls (i.e. the x or y value) by manually clicking on each data point and typing in a new text. After doing this in Chart Options dialog, the “Automatic Text” option appears.

After searching for some add-ins in xls that can do this automatically, I came across the following site: http://pubs.logicalexpressions.com/Pub0009/LPMArticle.asp?ID=209#jon013).

============================================================================

Using Text in Cells for Data Labels

Excel lets you apply data labels to each point in a series, with options to use the Y values or the X labels in the data labels (pie charts allow a few other options as well). You can manually change each label, but what if you want to use a range of cells in your worksheet as data labels for your chart series? There are a couple useful and free Excel add-ins that can automatically label data points, using labels in a worksheet range:

1. John Walkenbach's Chart Tools

http://www.j-walk.com/ss/excel/files/charttools.htm

2. Rob Bovey's Chart Labeler

http://appspro.com/Utilities/ChartLabeler.htm

============================================================================

The above mentioned tools are free and can be plugged into xls as an add-in. I tried out both of them and found it very easy to assign the labels. I hope this information will be useful to you.

Thanks,

Prem Pasupathy

Class of 2007

|| Indian School of Business || Hyderabad - 500 032 || India

Hutch Valutaion and Indian Mobile Market - IK@W

In case you have not checked out Indian Knowledge @ Wharton, this week is a good time to start. There is a story that gives a 360 view of the Hutch valuation in the context of the larger Indian mobile market. As is typical of K@W it tempers what industry experts have to say with views and analysis from academia, including faculty from ISB:-)


So, any further thoughts, predictions on how this is going to play out?

The Hutch $20B+ Valuation

Wanted to start a thread on the current bidding war for Hutch! We talked about this in the first Business Intelligence Using Data Mining (BIDM) class today in the context to mobile companies managing churn - keeping subscribers from switching to competition. Studnets alluded to the impressive subscriber growth and the higher than average ARPU that Hutch enjoys. Are there any spectrum issues? There is definitely more to the story...Thoughts??

India's Emerging Mobile Internet: The Spectrum of Choices

(As appeared in the Dec 31, 2006 issue of Business Today, by Ravi Bapna and Arun Sundararajan)

Yahoo India's screaming billboards remind anybody who hasn't woken up to the fact that the Internet in India is coming soon to a mobile phone near you. Several concurrent trends suggest that this is not wishful thinking. Data from the second quarter of 2006 indicates that mobile phone sales currently exceed PC sales by a factor of fourteen! The disparity is greater in the rural areas, home to 71% of the population. In September 2006 alone, more than 6M new mobile subscribers joined one of the seven licensed operators, taking the mobile user base past the 120M mark. Contrast this with a total of less than 8M wireline Internet subscribers, suggested by the June 2006 data from the TRAI (http://www.trai.gov.in/trai/upload/PressReleases/377/pr9oct06no95.pdf). A PC sold in India isn’t always connected to the Internet, while all mobile devices have basic data messaging capabilities, and not surprisingly, the same report also suggests increasing congestion levels on mobile networks. Together with a rapidly expanding economy, and an increasingly active consumer society, the elements are ripe for a forthcoming mobile based Internet revolution.

Yet, much of this future depends on some key policy decisions that are currently on the desk of the DoT. Foremost, as India gears up to undertake the most ambitious expansion of its mobile infrastructure yet, it is critical that the right companies are allocated the spectrum necessary to (a) accommodate the projected staggering growth in mobile usage, and (b) roll out the advanced high-speed wireless technologies that will form the backbone for mobile electronic commerce in the near future. While much of the debate is being carried out under the banner of spectrum allocation for high bandwidth “3G” services, its context is larger and the policy implications are wider.

It is useful to begin by establishing that the spectrum in question, a certain electromagnetic chunk of the air above us, is a scarce resource, and one that belongs to the public at large. Cellular operators need access to this spectrum to carry voice and data over their networks, and companies around the world have paid a range of prices, from $0 in countries such as Luxembourg and the Czech Republic, to $87.5 million in Slovenia, all the way up to $34 billion for five licenses in the UK. However, it is important to realize that to roll out a new generation of mobile services, spectrum is necessary but not sufficient. The realized value of this public resource and whether the promise of 3G to the common man will be fulfilled also depends on the extent of infrastructure and equipment deployment to follow. The true capacity of 3G depends on not just the frequency of spectrum, but on the extent of massive capital investments in infrastructure (for instance, the density of base stations) that companies choose. Further, better infrastructure implies more bandwidth and greater coverage, which in turn provides a richer infrastructure for mobile commerce. This is important because whether the upcoming allocation of spectrum translates into the ability of a Mumbaikar to watch a streamed Bollywood classic on the long commuter train ride home, or the ability of a rural farmer to get customized instructional help on nurturing the latest fruit varietals given his micro-climate, or an enterprise capability to seamlessly string together a mobile video-conference on the fly also depends on subsequent entrepreneurial activity in mobile application and commercial development.

To summarize, the value proposition of 3G lies in making the spectrum available efficiently, ensuring adequate subsequent infrastructure roll-out and providing the right incentives for innovation in providing the content and commerce that will follow.

Allocating 3G Spectrum and Subsidizing Infrastructure Deployment

Given that we have upto seven operators vying for five 3G slots that are being vacated by the Defense, a well designed lump-sum fee spectrum auction is an effective way of identifying the most capable companies. Yes, an auction is clearly better than a "beauty contest" in which allocation decisions can often be flawed because of politics or an incomplete understanding of the true capabilities of the contenders. However, it is equally important that we utilize the current state-of-the art in spectrum auction and mechanism design. This includes allowing for bidders to use so called “bundle bids” to express complementarities in their valuations for getting, say, an extended urban area or a certain contiguous region to derive economies of scale. Under such a scheme, bidders could jointly bid for say Delhi and Punjab and Haryana, or submit a bid that reflects synergies in the market for Mumbai and Maharashtra. These synergies are natural if one factors in the ability to share marketing and customer service infrastructure and reduce roaming charges to subscribers. While bundle auctions are mathematically complex, significant recent advances have been made in reducing the computational burden of such auctions. For instance, the Adomavicius and Gupta combinatorial auction from the University of Minnesota presents a user-friendly and real-time English auction-like version of such a mechanism.

It is also worth noting that India's mobile market is brutally competitive, and the desire to win will likely cause companies to overbid for their licenses. This is risky, because the winning firms may end up saddled with excessive debt and an inability to raise the capital needed to profitably build out their infrastructure. This in turn will hurt the evolution of mobile commerce in the country.

Keeping in mind the need for rapid infrastructure buildout following the allocation of spectrum, we recommend that the license revenues be utilized to subsidize the future deployment of infrastructure. This can be achieved by providing the winning firms infrastructure buildout subsidies that are proportionate to their winning bids and their subsequent on-the-ground activity. This will favor those companies that have the desire, capability, capital and plans to deploy the best infrastructure possible over ones who bid a lot for spectrum and then don't build out sufficiently. True, this could inflate spectrum bids, since companies will adjust for getting back some of their bid as a subsidy. But this is a not necessarily a bad thing, because it aligns private and social incentives, by committing the winning companies to putting in future infrastructure. The key idea is that once the spectrum is won, the cost of the winning bid is sunk, and the subsidy gives companies steeper returns from infrastructure deployment, which increases their incentives to do so, and accelerates both the pace and quality of the backbone for mobile ecommerce.

Will the Indian Mobile Net be Neutral?

In case you are wondering why the subsidy should be give to the operators and not, say, to the future content and commerce providers, you are onto something fundamental. A passionate debate along similar lines is now under way in the US, under the banner of “net neutrality”. Should an ISP be allowed to charge you higher rates for visiting Google rather than Yahoo? Is it in the spirit of the Net to start looking inside data packets to ascertain where a packet is going, or what application it belongs to? Should a VOIP packet at a given router be preferred over a WWW packet, or priced differently? Should a minority inner-city neighborhood be given the proverbial bypass on the information superhighway?

Once the spectrum is won, and sufficient infrastructure is put in place, it is reasonable to assume that carriers will need to do what they can to recoup their investment and maximize their rate of return. They will be tempted to translate their control over the channel into discriminating in favor of content providers who are either owned by them, or who pay them better licensing fees in exchange for access. This reduces the incentives of independent content providers to innovate, because of what economists call a threat of "holdup", and a fear that they will not get enough returns on their innovation because the infrastructure provider will extract disproportionate economic rents. A similar story played out for a long time in the past with long distance telephony in the US, where the local access provider charged the long-distance providers a hefty percentage per minute. Currently, the wireline Net is neutral in the US, and the debate isn’t likely to end soon. The key lesson for us in India is that we have to be careful not to commit to policy that gives the infrastructure owners too much power, since they could strangle future innovation in content, commerce and application development. But yet, they have to have enough skin in the game to feel comfortable spending billions on the spectrum and infrastructure so that the content and commerce emerges.

All told, there is a delicate balance to be struck, one that calls for a national debate and the use of global thought leadership. The future of ecommerce in India rests on it.

(Ravi Bapna is faculty member at the Indian School of Business and is the Executive Director of the Centre for IT and the Networked Economy. Arun Sundararajan is a faculty member at NYU's Stern School of Business and Director of the IT Economics track at NYU's Center for Digital Economy Research)