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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 end-
of-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
• 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

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