The very interesting "Missed Call"

This article in WSJ shows the power of technology through this innovative use of mobiles by the fishermen  in Tamil Nadu. This article points finger to the miserable weather forecasts of traditional agencies that makes fishermen feel the need of above SMSes. In developed countries the forecast is quite accurate and there is no need for such services.

But then, India is a market full of innovative uses, especially in the mobile space. The earliest innovation being the missed call. For readers from outside India, a Missed Call is where a caller calls and disconnects before the call is picked up. With mobile users, the caller's number is displayed on the mobile of the called party. It is quite widely used in India.

Now what is the use of a missed call? I will list few scenarios, but I am sure there are many more depending on the inter personal communication protocol (IPCP). I will come to IPCP a little later.

Scenarios:

1. Caller does not have money to spend on a call and wants the other person to call. He/she makes a missed call. The other person calls and speaks. This is probably the most basic of the uses.

2. Both parties have agreed to meet at some place. Whoever reaches first will give the other person a missed call.

3. A missed call is made to economically convey nice emotions like, "I miss you" or "I love you".  The thoughts reach the destination without costing anything to the entrenched parties.

So what is IPCP - Consider scenario 2 above. Now the 2 people have decided that a missed call means "I have reached". IPCP is established and will expire with the missed call.

Similarly, say A and B are going to a wedding. They are reaching the venue directly and they need to buy a gift on the way. Whoever buys a gift first gives a missed call. Similar to above, yet different.

One can think of hundreds of such examples. The idea of IPCP is the users decide the meaning of the missed call. And who framed the concept of IPCP....well that would be none other than yours truly :)

And, IPCP also leads to some really amusing and sometimes embarassing situations. More on that in some other post.

How 2009 Went By? Part 1

As is the ritual, year endings are mandated with the lists of 10 somethings...top news, best, worst....

So here are the 2 telecom updates:
1) MBB on top 10 telecom news. 
2) Telecom M&A details from Unstrung - Check the AdMobile story in there. Interesting.

As I gather more such lists, I will either update this post or post next part.

Also posting these / some of these individually on twitter under #How2009Went. If you got any interesting ones, post in comments here or tweet them.

Mobile banking for shareholders

Here is a very interesting application of m-banking. This article in Business Line reports mobile share transfer: Transfer your shares through mobile phone

Such VAS services are forming important part of the ever expanding telecom offerings. Offerings that go much beyond voice and SMS. For example, check this earlier post where I spoke about location based services being used to encourage use of public transport in the Bay Area.

Security is very important in these cases. At the least, the interface should take multiple confirmation since the network should be sure that the subscriber is indeed requesting this service.

Check one of my earlier articles if you want to read more on that:
Mobile Money Transfers - Opportunities and Issues

3G in India...more discussion

Here is an article that discusses the role of rural market for 3G providers.

http://www.mobilebusinessbriefing.com/article/rural-areas-to-drive-indian-3g-growth

Interesting forecasts there.

As I had mentioned earlier, the recent cut in prices is probably a beginning towards the rates that will arise once 3G markets open. Since the rural areas still have potential, they need to be tapped. It is obvious that service providers would want to generate as much demand there as possible.

Interesting telecom blogs

Some very interesting telecom blogs

http://3g4g.blogspot.com/

http://developing-telecoms.blogspot.com/

http://comworldseries.blogspot.com/

http://www.mobilefuture.org/blog/

Going Green with Mobile Technologies (Location Based Services)

It is a no-brainer on how much greener the earth will get if folks start using public transport where possible. Interesting ways to encourage people to board that bus or railway train will help reduce emissions.  It also helps improve health since you need to walk at least a few steps farther than the garage to the bus or train stop. Location based services uses location of a mobile to deliver value added services.

I am impressed by this game that Bay Area public transport authorities have started to encourage usage of public transport systems. Reached this location from NewYork Times BITS page.

Countries like the US, where urban dependence on public transport is pretty low, do need such initiatives. Particularly impressive is the use of the location based technology. What makes you play this game are incentives such as "being a Mayor gets you some freebies".

Awesome!

Telecom stocks hammered - Why the haste?

Indian telecom stocks have been heavily hammered in the last few days. I was surprised.

Further to the pay-per-call, there was the 50 paise call and the discussion about possibility of mandate for per-call pulse that caused almost panic selling in the markets. It seems a hasty conclusion that all telecom is going to lose overall...

Following points need to be thought of in the context of Indian telecom scenario:
1. The ARPUs are falling but they still seem to be a function of the demand-supply equilibrium. Consider this, which markets are still untapped in India? Rural markets. The teledensity of rural ndia is far behind the urban. So the rural market is probably stimulated at a lower price and the industry is probably responding to that.

2. Commoditization is natural but this rural market would still allow the business to be a good business because of the volumes.

3. Now, in the recent times, operators have adopted several measures that are cutting costs like Infrastructure sharing, outsourcing their network operations etc.

If the operators are willing to pass this cost savings to customers, then that is actually good news for customers. Perhaps the demand generated by this will more than compensate the reduction in revenues.

4. The 3G scenario has still not even started. I am sure every operator definitely would have a strategy for 3G. They will find new ways to generate interest in 3G apps in the urban market. Particularly, business customers and the youth segment.

5. Operators are also trying to unlock value by spinning off businesses like tower business etc.

Considering this, I thought it was a little premature to assume that telecom story is over. I would rather wait and watch.

Valuing LTE Patents of Nortel - An approach - Part 2

I received a few comments on part 1 of this article. Thanks to Paddy and Fehrzard for their comments. This article is an attempt to make the first one more complete.

1. First, the disclaimer - Black Scholes assumes efficient markets as well as liquidity of the asset. Both may be challenged and rightly so.

2. Now, one very interesting thought on how to view patent is how to define it? It may be as a product or a service that can be developed as a result of the patent - this was the primary assumption in the earlier article.

However, the patent is also something that gives exclusivity to the innovation, not the innovation itself. Hence more pertinent is the value of 'exclusivity', or even the benefit from suing the competitor who infringes the patent.

3. The time to expiry is minimum of patent expiry or time for technology obsolescence.

4. A big assumption in my first article is the knowledge of investments needed in developing marketable products from the patents. Obviously, this is a difficult thing to predict. One can go by historical stats but that too is no guarantee to future. Only thing we can do is scenario analysis.

5. Finally, the opportunity cost of delaying the project also needs to be adjusted in the calculations.

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Tailpiece - Nortel has now put on block the Carrier Division - Software minus the patents. More info on All About Nortel.

Valuing LTE Patents of Nortel - An approach

Now that Nortel's Wireless and Enterprise businesses have been auctioned, Nortel still has LTE Patents with it. LTE is a considered to be a successful technology for the 4G wireless business and is expected to take the world to seamless broadband wireless paradigm. Nortel is said to have 600 patents in this area. Now let’s try to assess how this asset can be valued.

Following is with the assumption that the potential buyer is going to know everything about the patents.

1. A Patent is an asset that will be used directly or indirectly through applications based on the patent.

2. First step would be to find the directly assessable market based on history. That market is of those products this patent and its extensions can directly substitute.
That is the possible market potential.

The subjective part here is how much one can be sure on this market potential.

3. Next is finding the potential of those products that are not conceivable as of now. This is the tricky one.

(i) One way to approach this is on the basis of historical statistics of patents from the same industry. For example, in this case of 4G, we can take a random sample of 600 patents (or possibly more) from the period when 3G (or any other technology) was a new area of research.

(ii) Now analyze how many of these samples proved to be huge successes, moderate successes and damp squibs. With this as the basis, we can use the same probability on this set of LTE patents (this is a huge assumption). Obviously this is not something that will always work yet if we are going to use history as any indicator then this is one way to follow.

(iii) The next 2 things we can draw from the above sample would be the standard deviation and volatility.

4. Now if we look at this set of patents as an asset, then the value of buying an asset with unknown potential is nothing but buying an option on the asset.

5. So now the value can be assessed as the value of a real option with a possible market value that was calculated in points 2 AND 3.
a. We have - Possible Value of the asset and the volatility.
b. We also have the risk free interest rate.

c. Now the tricky ones, the strike price of this option and the expiry time.
(i) The PV of the investment in productizing these products is the strike price. Why? Compare this to a stock call option - What you earn in a call is the difference between the stock price and the strike. Similarly, here the gain of the patent owner is the difference between the revenues and capital cost.

(ii) Now the expiry time is how long these patents are useful. We cannot sit on 4G patents when the market is already preparing for 5G technology. Beyond a certain time, any technology simply loses relevance.

6. At this point we can insert the values in any Black Scholes Calculator.

Alternative
An alternative to this step is to break the 600 patents in several sets of like patents and then assess each set individually. The next step can be to sum them all and use these steps for overall value or consider each set as a separate option and value them one set at a time.

Major assumptions of the above approach -
1. This set of LTE patents will have a market performance similar to historical set of randomly chosen 3G patents from a similar period in 3G's lifecycle.
2. Cost of productizing and other capital costs.

I have applied theory of real options in this case and will try to find out of there are other better methods already used elsewhere. That would form some other post

- Siddharth Garud

Reference:
http://www.cbc.ca/technology/story/2009/07/29/f-lte-long-term-evolution-wireless.html

TRAI on customer consent for mobile VAS

Hmmm....

Interesting news. TRAI has asked Telcos to take explicit consent of customers before activating VAS features like RingBack Tones etc.

Wonder if we have stats on the number of customers who had RBT activated accidentally. The charm of quick provisioning goes away but the customer dissatisfaction due to accidental activation (and hence charge) goes away as well with this.

I will try to check if there is anything that other countries have in this regard.

Here is the ET piece on this one...
TRAI asks Telcos to take consent