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Impending Broadband Wars in India

…and what combatants must keep in mind

While we in India are busy fighting over the rights and responsibilities of moving from the subsistence agricultural existence to the industrial era (“land bill”) or over how the profits from digging up coal and lighting up more brick-kilns and coal-fired boilers will be divided (“coal bill”), there is a similar yet different battle going on in the United States. It is a battle that is similar to the land and coal battles in India in the sense that this battle in the US is also about who gets what rights in exploiting a public resource. Yet, it is different in that it is not about rights in the Industrial Age (those issues were settled in the US in the 1930’s) but about rights in the Information Age.

The issue at stake in the US is whether broadband service providers are “common carriers” or whether they are not. Promoters of the view that they are common carriers shout from the rooftops that if the US government does not declare that broadband service providers are common carriers, freedom of expression will be lost forever. The coalition that is on this side are organizations such as Free Press, Public Knowledge, People for the Ethical Treatment of Animals and Common Cause.

Opposing them are telecom providers such as Verizon, AT&T and all of the cable TV industry who make the case that they are not “common carriers” and thus can charge different rates to different channels they carry and that if such differentially priced deals are not allowed, broadband service providers would no longer have the financial incentive to build networks or invest in innovation.

Why does the term “common carrier” carry such incendiary connotations? A common carrier is a person or company that offers services to transport goods or people for the general public under license or authority provided by a regulatory body. A common carrier differs from a “contract carrier” or a “private carrier” in that they transport goods for only a certain number of customers and that can refuse to transport goods for anyone else. Public airlines, railroads, bus lines, taxicab companies are examples of common carriers.

Tim Wu, a Columbia University law professor argues that no authority should be able to decide what kind of information is and isn’t allowed on the Internet. Wu has documented in his book, now considered a classic, The Master Switch: The Rise and Fall of Information Empires how the great information empires of the 20th century have followed a clear and distinctive pattern: after the initial free competition that follows a major technological innovation one corporate power or another emerges that takes control of the new medium and operated what Wu calls “the master switch”. He describes those decisive moments when a medium opens or closes in the history of phones, radio, television, movies and the Internet. All of these businesses are susceptible to the cycle of initial open-ness and then closure and monopoly because all depend on networks, whether they’re composed of cables in the ground or movie theaters around the country. Once a company starts building such a network it will eventually gain control over it and begin moving towards being a monopoly, closes the network to others and all innovation ceases.

Let me paraphrase Tim Wu’s concerns using an Indian context: If broadband service providers, largely telecom companies such as Vodaphone, Airtel, BSNL and increasingly cable operators, start to strike deals with companies such as Star TV or NDTV or Times Now, (or for that matter Google or Twitter) to carry their channels in preference to others because of financial deals that they make with these channels the battle will no longer be about who has a better product but about who can make the better deal. Another example is Toyota or Honda striking a deal with the Bombay Municipal Corporation that Marine Drive in Bombay would be accessible only to their brand of cars. If such deals were allowed, the basis of competition in the car industry would change. Car makers would, instead of trying to make the best product, make deals with highway operators.

“What we’re ultimately asking”, says Wu, “is a question that Adam Smith struggled with. Is there something special about “carriers” and infrastructure—roads, canals, electric grids, trains, the Internet—that mandates special treatment? Since about the 17th century, there’s been a strong sense that basic transport networks should serve the public interest without discrimination. This might be because so much depends on them: They catalyze entire industries…”

On February 26, 2015, the Federal Communication Commission (FCC),the regulator in the US and the rough equivalent of our TRAI, ruled that broadband providers are “common carriers”. So, Round One in this battle has gone against the telecom companies who provide broadband services, but you can be sure that more litigation will follow.

Do we need to worry about such things here in India? The World Bank’s index of how widespread is high speed broadband access in a country says that for 100 people in India only 1 has access to high speed broadband compared to 14 per hundred Chinese, 10 per hundred Brazilians and 29 per hundred Americans, so it would appear that we have quite a few years before we need to worry about such issues. But, on the other hand, the direction of technological development in the world is overwhelmingly pointing to imminent breakthroughs that will make high end services such as education and healthcare more affordable by using high speed broadband such services, so is it worth considering declaring, as the US has done, our broadband carriers as “common carriers”?

 

 

 

 

 

 

 

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Coming to India and Making

This is my analysis of the Indian government’s call to all to come to India and manufacture

When the talk turns to finding jobs for India’s young millions, “manufacturing” is invoked- if only India could manage to build a strong manufacturing sector just as our sibling rival China has done, all our job creation worries would disappear.

But it is perhaps also true that the word “manufacturing” evokes a vision of mindless, repetitive work on an assembly line first caricatured in Charlie Chaplin’s 1936 film Modern Times, poor Charlie plodding away at a relentlessly moving assembly line watched over by a distrusting supervisor.

Thus it is no wonder that solutions proposed for the “manufacturing problem” in India oversimplifies the issue: change labour laws that makes firing of workers easier than it is at present, make land available cheap (preferably free), declare tax holidays and so on. But there is some evidence from scholars who know a thing or two about manufacturing that most of this may be wishful thinking and the real solutions may lie elsewhere. Success in manufacturing is not just about being cheap- cheap labour, cheap land, cheap power and low/no taxes

Prof Suzzanne Berger of the Massachusetts Institute of Technology who co-chaired the blue ribbon Production in the Innovation Economy Commission setup to study this problem for the American economy (yes, they too yearn for more manufacturing jobs) points out that German manufacturing workers are paid 66 percent higher wages than American workers but Germany has $20 billion a month trade surplus in manufacturing whereas the United States for the same month under study, October 2012, had a $14 billion trade deficit. So, even in America, low wages are not the key to manufacturing success. She casts a similar skeptical eye on the popular explanations for China’s rise in manufacturing, most famously symbolized by Foxconn whose factory in Shenzen, China, makes all the iPhones, IPads and other state-of-the art Apple products that we all love. Analyses of Chinese growth, she says, emphasize low wage labour, foreign direct investors bringing capital and manufacturing export experience from Taiwan, Hong Kong and the West, cheap land, cheap loans and a protected and undervalued currency. She says the key to the success of Chinese manufacturers is that they excel at all forms of innovation that incorporate, enable and rapidly deliver products and solutions at the technological frontier even though they do not themselves initiate these technological innovations. An Apple manager, quoted in the New York Times explaining why they make iPhones, iPads and iPods in China says, “You need a thousand rubber gaskets? That’s the factory next door. You need a million screws? That factory is a block away. You need that screw made a little different? It will take three hours.” It is, she says, the ecosystem that provides the competitive advantage to Chinese manufacturers.

n reality, all “manufacturing” and all manufacturers are not the same. One dimension to see the difference is by the degree of R&D intensity, as a recent study in the European Union did. At the lowest technological edge are units that make furniture, clothing and tobacco products. At the next higher level are units that basic metals, rubber and fabricated metal products. Above them are the car makers and the makers of medical equipment. At the highest technological level are those who make pharmaceutical, computer and optical products. What is needed to nurture and grow each of these types of manufacturing is different.

Unknown to many in India, a Japanese academic, Professor Shoji Shiba, has been working for the past decade to transform Indian manufacturing. He has been trying to sensitize Indian managers and policy makers that success in manufacturing depends mastering how to reduce the time to market from the moment you conceive of a new product or a new feature in an old product, how to reduce frequent interruptions in production and so on. Thinking back over his work, he says the key to solving the Indian manufacturing puzzle is to change the widely held Indian understanding of manufacturing in the limited sense of “production”. This he calls the “small m” mindset. Manufacturing success depends on mastering several related aspects: design, research and development, sales and supply chain. Truly great manufacturing managers also need to understand issues like environmental change, societal change as well as technological change. His clarion call is to change the ‘small m’ mindset among Indian managers and policy makers to ‘BIG M’. Encouraged by people like Sarita Nagpal of CII, industrialists like Surinder Kapur and Jamshed Godrej and Dr Krishnamurthy, Professor Shiba has been driving a management education programme called the Visionary Leaders in Manufacturing in line with its goal of training a new generation of visionary leaders in Indian manufacturing. Students who join this programme spend their first three terms at IIM Calcutta, the next two terms at IIT Kanpur and IIT Madras respectively and return to IIM Calcutta for the final term.

It was William Blake who in his 1804 poem used the term “satanic mills” to describe the factories of the first Industrial Revolution that were springing up around him and thus encouraged many to view factories and factory work as grim and uncreative. May be it is time we left that antiquated notion about manufacturing behind us.

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The battle about Big Data

In many forums in the world one can hear the call of bugles and the rattle of drums as a new set of battles loom- battles about who owns what data and for what purpose.

According to the scholars Martin Hilbert and Priscila López writing in the February 2011 issue of Science magazine, up until the year 2000, much of the world’s data was stored in “analog” formats and on paper ( reports, books, newspapers and magazines) and film (x-rays, photo negatives, movies, TV programmes). That year marked a turning point when the world switched to storing stuff in digital form on PC and server hard disks, memory cards and the internal storage of cameras, mobile phones and camcorders. Since this shift, they say, the amount of data captured and stored has increased exponentially.With this torrent of data, or Big Data, have come battles about who holds this Big Data, for what purpose and whose benefit.
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The value of data is contextual. A nurse encountering a baby with high temperature will conclude that the baby is unwell and requires care; she is using data in a rules-based way. If the number of babies being brought in with elevated temperatures suddenly increases, hospital administrators may temporarily allocate more nurses to the paediatric department. This is a tactical use of data. At the Health policy level of state or country what is of value are broad patterns in data across hospitals or across years.

Peter Drahos and John Braithwaite of the Australian National University in Canberra, warn of an emerging era of “Information Feudalism”. They say that in Europe in the Dark Ages, the period after the fall of the Roman Empire, the established patterns of order and security broke down and small landholders unable to protect themselves against the attacks of brigands and barbaric tribes offered their land and services to more powerful neigbours who they thought would protect them. Land and liberty was thus swapped for physical security. Thus was feudalism born. Feudal lords gained enormous wealth and power and the social subordination and services of the majority, the peasant serfs. The Russian novel, “The Brothers Karamazov” dramatizes the power of these feudal lords. A peasant mother is forced to watch her young son being torn apart by a pack of hunting hounds because her boy had accidentally injured the paw of the master’s favourite hound.

Drahos and Braithwaite provocatively suggest that business people who are pushing for ever tighter copyright and patent laws through the World Trade Organization (WTO) and the World Intellectual Property Organization (WIPO) are the modern day equivalent of feudal lords. If in the medieval era power lay in the hands of those who controlled land, in our present era, the source of power lies in the control of information and data.  They warn against the emergence of Information Feudalism because of the transfer of knowledge assets from the intellectual commons into the hands of media conglomerates and life sciences corporations rather than individual scientist and authors. This, they argue, has the effect of raising the level of “private monopolistic power to dangerous global heights, at a time when states, which have been weakened by the forces of globalization, have less capacity to protect their citizens from the consequence of the exercise of this power”. It was the loss of Rome’s capacity to protect its cizens that provided the conditions for the emergence of feudalism.

There is an inherent clash of interests between businesses push to make profits from data and citizens need to protect their privacy and the national need for security policy makers must balance these competing interests. They can do this by ensuring that the underlying legislation on copyright and patents reflect this need for balance and that there is an adequate investment in the information and communication infrastructure. Most of all ensure that there is an incentive for sharing data for the greater good.

There are constructive ways to use Big Data available with public agencies. New York City, for example, has made 350 data sets from 40 different public agencies under its control available to the public via application programming interfaces (APIs). Citizen programmers are using their imagination and free time to create free Apps that citizens can download onto their mobile phones and tablets. The “Water-on-the-Go” App, for example, helps users find the various locations in the New York City where clean tap water is available at a token cost for thirsty citizens. This free app supported a city government initiative to encourage citizens to drink water in preference to soft drinks (a typical can of which contains 150 calories, the equivalent of 10 teaspoons of sugar) and reduce the use of plastic bottles. For examples of other imaginative apps that work off public data: http://nyc.gov/cityapps).

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Financial Derivatives in the 2000′s like Thalidomide in 1950′s?

Remarks I made at IIM Cal’s International Finance Conference, Calcutta  Jan 10th, 2010 with India’s Finance Minister, Pranabh Mukherjee attending.

‘Whenever financial experts gather nowadays the talk inevitable veers to the financial industry meltdown of 2009 in the US and Europe. Was it greed on part of the market participants, was it a failure of the regulatory system, was it the compensation system for financial industry executives that lay at the bottom of this crisis which has created immense suffering for tens of thousands of ordinary people in the United States and Europe?
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We have seen an outpouring of dozens of scholarly papers, many dozens of books and thousands of newspaper editorials trying to make sense of these events. Implicated in all of this are ‘derivatives’,mathematical abstractions. Even a savvy marlet player like Warren Buffet has called them weapons of mass destruction.

But do derivatives deserve this kind of demonization?

I draw your attention to a similar event inthe pharmaceutical industry in the 1950′s in the early days of the synthetic drugs era when a German company came up with a ‘wonder drug’ that supposedly cured coughs, cold, headaches and was also a tranquilizer, a pain killer and could also cure insomnia. It was soon a best seller in many countries. It was then also discovered that this wonder drug could also relieve morning sickness in pregnant women, so tens of thousands of pregnant women took to it.

Then reports started filtering in that pregnant women who took this drug were giving birth to babies with deformities: the feoutus would have fish-like flippers instead of arms and legs. Tens of thousands of children were born by the time alarm bells rang and sales of this wonder drug were halted.

This, of course, was Thalidomide.

There were many calls at that time for the ban of all further synthetic pharmaceutical innovations such as derivatives are now being demonized. Wiser counsel prevailed. An elaborate system of clinical trials was instituted, the scale and expertise of national level drug approval authorities like the US Food and Drug Administration was bolstered. The occasionally confliciting needs of Consumer protection and technical innovation were reconciled. The world has since then benefited enormously from an outpouring of synthetic pharmaceuticals.

The derivatives issue needs to be looked at in a similar light. If properly designed and tested and with the right regulatory system, derivatives could play as big a part in our lives as other financial innovations such as the metal coin or the paper currency note or Bills of Exchange have done.
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Instead of demonizing the derivatives innovation, we should put in place testing facilities and regulatory systems which will allow mankind to benfit from this financial innovation.  Central to this new system of regulation of derivatives are expert and neutral bodies who can undertake stres testing of derivatives.

IIM Calcutta’s Financial Research and Trading Lab is one such facility which is ready to undertake such stress testing on behalf of regulatory authorities.

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Give TRAI’s Broadband Plan a Hand

Piece I wrote for the Economic Times today

    Screams of pain normally accompany the release of a Consultative Paper by the Telecom Regulatory Authority of India, but the one on Broadband released last week  has been met with a deafening silence. This worries all of us in the internet industry.

    Is the silence symptomatic of Indian telecom players’ and policy maker’s long standing disinterest in broadband?

    TRAI’s thought on how to make broadband more affordable and better quality mark a revolutionary departure from India’s normal laissez-faire telecom policy stance. It actually proposes an Rs 32,000 crore government initiative to build India’s Information Super Highway. , This, when done,  will impact our economy more,  much more, than even the Golden Quadrangle, that network of highways that is being built to connect our great cities.
   
    This initiative does not come a moment too soon.  For a country that has taken bold new initiatives in expanding education and health care and all aspects of our national infrastructure, we have treated the most important infrastructure of the modern knowledge economy, a broadband infrastructure, with benign neglect. As a result, India’s Broadband record is dismal. Broadband prices in India are the highest in the world (with the exception of Myanmar). India’s broadband connections are a mere 9 million.

    Part of the reason for such benign neglect is an under-appreciation by our policy makers and public about the role of broadband in a modern economy. Talk of building better physical roads or bridges and we can easily imagine what this entails and what benefits that brings. Talk of broadband and many go, ‘Oh, that’s what my teenage son uses to download mp3 music!’

    Broadband is that but it is also much more. Broadband is what will drive electronic commerce which in turn will make our big business more efficient, and allow our small businesses to  reach out to world export markets. It is also what future-oriented companies like Aravind Eye Hospital use to deliver low cost, high quality medical services. It is the backbone on which high quality school and college education can be delivered cost-effectively to our vast population. And it is the base on which eGovernance initiatives rest.

    There is also an ideological misunderstanding behind this benign neglect:  many policy makers and the Indian elite may be read the wrong lessons into India’s massive private-sector lead mobile phone expansion. Why not leave broadband expansion to the private sector and they will do what they did for mobile phones: raise international capital, compete with each other, bring down prices and expand the industry.

    But this, as I said, is a misunderstanding. Broadband infrastructure is like a bridge or an intercity highway: costly to build and on which the financial returns may come only in 15 to 20 years. The mobile-voice businesses get to profitability much sooner and this make private equity capital much more available for mobile voice services and very difficult for broadband data services. If the State does not build it, no one else will.

    How, you may ask, have the US and Europe done it? The answer to this is that by the time internet came around in the mid 1990’s, the high quality copper or fibre infrastructure was already built out. All they needed to do in those countries was to build internet services over the same infrastructure.  In India, there is next to no such infrastructure even today. Somebody has to build it.

    In spite of that head start, many advanced economies are doing even more:  the United States Federal Government has already put our $110 bn in 2004 and $350 bn in 2005 and continue to spend at similar level to bring broadband to America’s rural areas. The national governments of Britain, Australia and Japan have done or are in the middle of similar levels of spending.

Why not leave it to the Mobile Phone companies to offer broadband services through wireless, you may ask. After all, haven’t they bid gigantic amounts for broadband wireless spectrum for this very purpose? The answer to this is that no doubt they will, but because of the very nature of wireless broadband technology, such services will cost Rs 1500 to Rs 2000 a month- excellent for the lap-top toting executive but too expensive for middle class India.

    For broadband to get to the 100 million households who make up 40% of all households in India, we need a service which is priced no more than Rs 200 per month, not Rs 2000 per month. And we need this service with no ifs and no buts: no conditions that limit the amount of data you can download and no conditions on the time of day when you can use it.

    TRAI proposes to get there by 2014, that is, in four years from now.
TRAI’s grand vision is to take broadband fibre right up to 374,000 villages at a cost of Rs 32,000 crore. TRAI estimates that Rs 18,000 crore of this is to be spent on the manual labour of digging trenches and laying the cable and the balance Rs 13,000 crore is the cost of fibre optic cable and telecom equipment. They suggest that the manual labour component be done National Rural Employment Guarantee Scheme. The equipment cost of Rs 13,000 crore, they suggest, be met from the Universal Service Obligation Fund.

     They also propose that a National Fibre Agency be created to execute this massive project. Once this core network is built, private sector companies like Cable Operators, Cyber Cafes and Internet Service Providers can tap into this and create a vibrant reseller market taking the service to consumer homes, schools and offices.

    Rarely, has a government policy making group set out such a carefully thought-out and visionary plan.
     Let’s give TRAI a hand.
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Book Review: Munshi, Abraham (Editors): “Good Governance, Democratic Societies and Globalization”

It has been a source of unending mystery to me why “corporate governance reform” in India has always meant moving towards the Anglo-American  Model in which shareholders’ interests are paramount (that is to say, the interests of employees, customers, suppliers or even society at large have no place) , financial markets are a source of not just capital but also discipline and there is no role for government-set industrial policy.

Darryl Reed’s contribution in this collection supplies some answers: India has a legacy of a British-inspired governance process which is embedded in our Companies Act, there is a perception among the Indian elite that we tried energetic state intervention in the 50’s and 60’s and it did not work, we believe that an activist capital market enforces domestic competition and this helps build internationally competitive domestic industries are some of the reasons.

At a more macro level, the Anglo-American model is and is embedded in the ideology of the IMF/World Bank ( dubbed the “Washington Consensus”) and is part of  terms for their  financial aid to countries. India’s turn for this came in 1991 when the country ran out of foreign exchange and had to go to the IMF for a structural adjustment program funding. A series of ‘reforms’ were set in motion from the top down.

The Editors of this volume calls this approach one of the “Errors of Simplification” and their view is that national differences matter and that there are many different routes to a liberal democratic regime of governance and not just the one route prescribed by the Washington Consensus.

Who supports such reforms and who opposes them and why has been another source of wonder for me. Darryl Reed has an answer to this. “Such reforms,” he says, reflects the interests of the international ( and some domestic) business and political elites”.  Who exactly these domestic elites are and what specific interests of theirs are served in this support for reform is an intriguing question.

This book is the outcome of an international conference held at  IIM Calcutta in 2002 as part of the European Union-India Economic Cross-cultural Programme.

At the time of this conference, 2002, the globalization and its attendant neo-liberal  ideology tsunami was at its peak and appeared  unstoppable. Many papers in this book assume that and thus many prescriptions  are aimed at mitigating its  ill-effects by  putting a supra-national regulatory system in place.

The Wall Street financial crisis of 2008 and the return of an activist State in the United States turns that assumption on its head.  Globalization no longer looks inevitable and the shine has been taken off from blind faith in the power of markets. Other than this perspective , this book is a must-read for anyone thinking  about the issue of corporate and country governance. Its available to buy online at http://books.rediff.com/book/biju-paul-abraham

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Business School Experience

Interview I did with Bhakti Chuganee of Business India , September 2009

Question: What made you decided to go to business school in the first place?

Answer:  I had run into an IIM student (by accident) while I was in final year of undergrad and still figuring out what to do next; his glowing report of the multi-disciplinary  curriculum sounded exciting to me

Question: Why did you choose IIM Cal?

Answer: At that time ( 1969) there were only two: Cal and Ahmedabad. Since IIM Cal was the first one and ( viewed from the Kerala small town that I was in), Calcutta was ‘big city’ and the capital of Indian football (which was what I lived for those days)

Question: In hindsight, what was your business school experience like?

Answer:  I was a Maths-Physics-Chem type and did not even know that there were ways of looking at the world like Sociology, Psychology, Economic History etc…so, discovering these was breath-taking and life changing. The main lesson you learn when you first enter these all-India meritocratic institutions ( IIMs, IITs, etc)  is that there are as many bright people in the world as you, that there are many different types of ‘brightness’ and that success comes from discovering what you like doing best and  from serving society
 

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The Old Economy and the New

Q&A I had with IIT Bombay’s Entrepreneurship Cell September ‘09

 Question: You have experienced both the worlds – the old economy (while at the agency Rediffusion) and the new economy (Rediff.com).When do you think the Internet will become an integral part of the media and marketing plan of companies?

Answer: Internet media today is only 2% to 10% of media spend  while it is 10%-40% of reach across countries This kind of lag of Spend to Reach is normal in the evolution of a new medium and we have seen ithistorically when TV and Radio came about. This gap is usually bridged in a decade or so

Question: In the Indian internet space a few players are taking away a disproportionate share of the revenue. When do you think this will change and when will revenue convert into profit for the players in the net space?

Answer: Winners-takes-most is normal for ad revenue; the answer is to build a supporting subscription revenue by delivering a really useful service

Question: Today there are hundreds of newspapers and magazines in our country. But a large number of them are loss-making propositions. Do you think emergence of online media like Rediff is a key factor in this?

Answer: Those newspapers that are ‘vanity’ businesses, that is, those owners who run them for returns such as promoting a cause, social prestige in the community and so on will keep going even if there are losses. The ones which are real businesseshave a decision to make. I personally hope they will all survive and prosper because newspapers are key social actors.

Question: What is the future for e-commerce in India, considering the numerous players in the industry, and the apprehensions the Indian consumer still has about the industry?

Answer: ecommerce in India is held back by poor broadband and credit card penetration and not by consumer apprehension. Government has to act with policy initiatives to fix this

Question: Rediff has been a trailblazer and a leader in the Internet space in India. What were the major setbacks and the major highlights while you were building up Rediff? What has been impact of the US meltdown on your business? How are you coping with the current recessionary business climate? You came up with a ” No ads on the homepage” policy in your latest revamp. How did it affect ad revenue overall for Rediff? If revenues decreased, where did you cover up for it?

Answer: The business we are in goes through techtonic change every five years or so and true to pattern we are in the middle of one right now. The current change is characterized by a move from PC to Mobile ( mode of access), from text to video (form of presentation), from ads to subscription ( revenue), from passive media consumption to active ( user generated media) and from personal to social. And all this is going on while there is a recession. But I think these are the challenges that makes for an interesting life, don’t you think?

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How IIM Calcutta Fared in Thought Leadership in 2008

Speech I made at the IIMC Convocation April 2009

     What an extraordinary year this has been!  Iconic companies, the ones who set benchmarks for management practices, companies like General Motors, Citibank, Meryl Lynch and Royal Bank of Scotland have been felled and now exist because of the kindness of their governments.  World over, there is a sudden loss of faith in the power of markets, in the sagacity and expertise of corporate chieftains. The very role of the private sector as an economic institution that benefits society is being questioned. Is a new world in the making where there will be a new balance between the role of the state and that of the market? Will the present world economic system that is driven by what some call excessive consumer consumption, particularly in the United States, be replaced by some new architecture?
    
     Clearly, thoughtful people throughout the world are reflecting on all this.

     Today I will walk you through some of the thinking that is going on within the IIM Calcutta faculty and graduate students as our contribution to this discourse. As you will see, the quality of this thinking is high indeed as some of the most prestigious journals in the world have published this work.

     As a first example, lets take the extraordinary turn of events in which Indian companies long used to playing a defensive game in our domestic markets are taking the battle abroad and in the process transforming themselves in to multinationals.  Raveendra Chittoor, M.B. Sarkar, Sougata Ray, and Preet Aulakh looked at a specific case of this  phenomena, the story of Indian pharmaceutical companies stepping out into the world in their , Third-World Copycats to Emerging Multinationals: Institutional Changes and Organizational Transformation in the Indian Pharmaceutical Industry. This found a place in the world renowned management journal, Organization Science.

     Then there is an equally extraordinary phenomenon, the acquisition activity by Indian companies in international markets. Sathyajit Gubbi, Preet Aulakh, Sougata Ray, M.B. Sarkar, and Raveendra Chittoor took a look at this and their paper, Do International Acquisitions by Emerging Economy Firms Create Shareholder Value? The Case of Indian Firms has been accepted for publication by Journal of International Business Studies, one of the highest rated journals across all management disciplines. What is significant here is that Sathyajit is the first ever doctoral student from India to get an acceptance in any “A” rated journal before completing the dissertation.

     Does the founding context of firms leave a long-term imprint on them and constrain their future degrees of freedom? This question has importance in India as many family-dominated business groups face the new ,dynamic environment. Indrajit Mukherjee, a doctoral student studied this issue and his paper was nominated  for the Best Conference Paper Award in the Strategic Management Society Annual Conference last year at Cologne in Germany.

     These three  papers are from our Strategy Group which is growing into a formidable research team.  During the past three years, five of their doctoral students namely, Raveendra Chittoor, Indrajit Mukharjee, Sathyajit Gubi, Anubha Sinha and Somnath Datta presented or will be presenting more than 20 conference papers in top tier conferences such as Academy of Management Annual Meetings and Academy of International Business Annual Meetings. Additionally, half a dozen of papers have been published by them in high quality international journals such as JIBS and Organization Science

     Let me move next to that issue that is centre-stage during the current financial crisis that grips the world- the issue of governance. Governance, particularly good governance is like love, something that everyone aspires to and wants but seems so hard to get in todays world. What better time to publish original insights into governance. The Intelligent Person’s Guide to Good Governance is a very timely book by Prof Munshi,  Retired Professor of Sociology here, Biju Paul Abraham  one of our young professors and, Soma Chaudhuri  of Vanderbilt University..The central argument of the book is that any serious engagement with good governance must go beyond an exclusive reliance on the state or the market and must explore different modes of partnerships, including public participation.

     Another perspective on governance was contributed by Prof Sushil Khanna- he reviewed 30 years of Indian experience in corporate governance and contributed a paper to the European Conference on Corporate Governance in Brussels.

     One of the features of todays uncertain world is that a firms external environment can suddenly and irretrievably change. This shock can be brought about by technological evolution or government policy change or, as we recently experienced, a crisis in housing markets in far-off places.  Suddenly a firm finds that human assets created arduously over many years are mismatched to the new challenges. How does the Human Resource policy of a firm respond in such an event?  Sumita Kelkar, a doctoral student, guided by Prof Prodip Sett explored the dimensions of HR flexibility and postulated a new one which they call flexibility inducing HR practices. Their paper, Environmental Dynamism, HR Flexibility, and Firm Performance: Analysis of a Multi-Level Causal Model”  has been accepted for publication in the International Journal of Human Resource Management which is  one of the top two Human Resources Management – journals in the world.

     This is Sumita’s second publication in this journal.. Her first article was accepted for publication by IJHRM early this year. Both these articles are out of her thesis work at IIM Calcutta.
Contributions from our Finance and Control Group include a novel NPV-based method of pricing telecom infrastructure by Prof Ashok Bannerjee and Debasis Saha and presented at the Hawaii International Conference on Business.

     Contributions of our Operations Group include a paper on supply Chain issues by Prof Subroto Mitra presented at a conference in Hawaii; another paper from him on the Logistics Industry at a conference in Lugano, Switzerland; a design of a game management software for the Oil industry by Prof Balram Avittathur presented at the International Service Systems conference in Melbourne , Australia; on modeling regional electricity load by Sahadeb Sarkar at a Honolulu Conference; a strategic planning model for freight movement by Prof MN Pal, Sourav Basu, and Prof Nag presented at a conference in Cartegena de Indias, Colombia; another paper at the same conference by Prof Ashish Chatterjee and Dipankar Bose on Capacity Planning under Demand Uncertainty; one on ordering strategies for short-lifecycle products by Prof Balram Avittathur  presented at the International Symposium of Logistics, Bangkok, Thailand; a paper on probability matching by Prof Rahul Mukherjee at the Yokohma, Japan conference on Stastical Computing and another paper at the same conference by Prof Saibal Chattopadhay on designing pilot samples under certain specific conditions; one on aspects of data envelopment analysis by Prof Sanjeet Singh at a Washington DC conference.

     Every state Chief Minister sees the setting up of an IT services industry as the route to providing high-paying jobs in his state. You see these well constructed apparitions spring up on the outskirts of our major cities. You can see many for example on the road from Calcutta Airport into town. What is the implication of this kind of frantic building or land use and land markets? MK Satish guided by Prof Annapurna Shaw, took a close look at this in their paper, Information Technology, and Information Technology Enabled Services Cluster Growth: Impact on Metropolitan Land Use and Land Markets.

     In our attempt to correct various wrongs in our society, we have been experimenting with various kinds of reservations and the jury is still out on which of these deliver the results we hope to get from them. One such experiment is the ongoing reservation of some Gram Panchayat Head positions for women. In a co-authored study, Prof Ragabh Chattopadhyay found that there was a significantly higher investment in drinking water facilities in those Gram Panchayats that were headed for women. The study, Women as Policy Makers, merited publication in Econometrica, the prestigious quarterly journal of economics. This certainly is a finding that reflects the new era: women make better bosses!

     It is only appropriate that in these troubling times that we look deeply not merely at the technocratic areas of management but also at cultural and value issues.  We have a slew of research papers from IIM Calcutta on these topics. Rohit Varman of our Marketing Group  takes a long , hard look at the phenomena of  Consumer culture  where people  portion pursue, acquire and display goods and services that are valued for non-utilitarian reasons, such as status seeking, envy provocation, and novelty seeking. In one paper, “Weaving a web: subaltern consumers, rising consumer culture, and television”, published in the international journal, Marketing Theory, he points out, among other things the troubling connection marketers make between a consumer culture and other western values such as democracy and modernization, as if consuming more is essential to being modern. In another article, due for publication in the prestigious international Journal of Consumer Research, Rohit looks at the emerging anti-consumption movement. There was a time such work might have been viewed as in the provenance of socialists, but many of you must have noticed President Obamas remark at the G20 Summit a few days ago that he was not in favor of the voracious consumer market that has been the United States for so long.

     Other contributions from our Marketing Group: a methodology for assessing the quality of Education as a service, presented  by Prof Koushiki Choudhury at a conference on Education in Paris; a similar study on service quality in  retail banking presented at a conference in Kuala Lumpur, Malaysia; an empirical classification of the global auto industry by Prof Profulla Agnihotri presented at a conference in Paris.

     Contributions from our MIS Group include the following: Prof Debasis Saha on methods to audit LAN-networks at a Hawaii Conference; a method of accurately computing fidelity in routing trees presented by Prof Parthsarathi Dasgupta at an international workshop at Newcastle-on-Tyne, UK; another paper by him on placement of standard cells and gate arrays at a conference at Montpellier, France;  a paper on using wireless-sensors in agriculture by Prof Somprakash Bandopadhay at a conference in Geneva, Switzerland; a paper on a pernicious form of online behavior, shilling ny Prof Ambuj Mahanti and his graduate student, Sanjog Ray at a conference in Patras, Greece; a framework for understanding technology use by virtual teams by Prof Priya Sethuraman and Prof Snjiv Vaidya at a conference at Christ Church, New Zealand; one on the dynamics of growth of Wikipedia presented by Priya, Rahul Roy and Amitava Dutta at a conference in Paris, France; a paper on valuation of combinatorial auctions by Prof Anup Sen, Prof Amitava Bagchi and their doctoral student, Spumyakanthi Chakraborty presented at a conference in Hawaii; Prof Subir Bhattacharya presented a paper on agent-based model for portfolio selection at the same conference; a paper on achieveing fault-tolerance in wireless networks by our doctoral student D Anuragh at a conference in San Francisco.

     Another slant of thinking on values here at IIM Calcutta has been led by Prof Panduranga Bhatta of the Business Ethics and Communication Group- looking for answers for todays challenges in traditional Indian values. His paper, “Using Indigenous Knowledge in Management Education: Indian Experiments” is being slated for publication in the US-based Journal of Management Education.

     So, as you can see, the research pickings at IIM Calcutta have been pretty good this year. Encouraged by this we are stepping up the budget for research funded from the Institutes own resources. The results I have described so far came out of a regime which had a budget of Rs 10 lacs a year; this year onwards we have budgeted Rs 2 crores per year.

     In addition to this,  we have budgeted for each faculty member to go to 3 international conferences in a block of 3 years as compared to just once every three years previously.  This is because we understand that world class research operates as part of a world-wide network of ideas and people. It is important that our faculty interact frequently with their international intellectual peers.  

     I, for one, cant wait to see all the wonderful and original ideas that will flow during this year and which will be my privilege to report at next years Convocation.
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The State of the Indian Online Advertising Industry- Is the Glass Half Full or Half Empty?


Speech I gave at the International Advertising Conference meeting in Bombay 26th March ’09

     It was in August 1995 that VSNL, then a state enterprise, started an ISP service in Bombay. By the end of that year India had 25,000 usersI started rediff.com around the same time, so its been an interesting journey.
     Today, India has 35-40 million users, defined as unique individuals who visit any internet site at least once in the last 30 daysa glass-half-full-or- half empty depending on how you look at things, as I will describe shortly
     This user base grew 20% or so and looks set to grow about the same this yearthat makes us the fastest growing market in the world
     We also have 300+ million mobile phone users; estimates of how many of these access the internet in any given 30 day period vary but 10m looks right
     By comparison, satellite TV reaches 250m and all of Print gets to 220m. So, internet reaches an audience just 20% of TV or Printbut delivers a disproportionate reach among SEC A&B groups
The Internet and Mobile Association of India estimates that Online ad revenue in 2008 was around Rs 500 crores or $ 100m. That makes it just 3% of total advertising in India. So, things are at a very early stage.
     The online ad ecosystem is by now reasonable well developed: all major ad agencies now have digital divisions and have started recommending online media routinely in their media plans; besides these, there are at least a dozen, well staffed Interactive Ad Agencies in each of the major metros. During the last year dedicated ad sales networks have sprung up: at least 6 in the general online space, 3 or 4 in mobile ad sales and at least 2 in selling video ads.
     I started by saying that the Indian Online scene is capable of being viewed as either half full or half empty. 40 m users puts India among the top 5 internet markets in the world, and the 20% y/y growth rates makes us the fastest growing. But 40m is small compared to the size of country we are. And this low number means that a generation of young people is coming of age digitally challenged.
     What could make us achieve the true potential of this market which many of us believe can be as much as 300m+ users?
     Universal availability of reasonably priced broadband is probably the topmost driver. This has lagged in the last few years because our telecom companies have , in the immediate past, seen it much more worthwhile to invest in mobile phone growth. Capital markets reward higher mobile subscriber numbers much more than broadband numbers; solving the last mile access problem requires capex and getting right of way permissions requires both money and time. However the last few months have seen a flurry of activity in broadband launches both in ADSL wired as well as wireless broadband.
     Availability of Indian language content is probably the next driver. The absence of standardized unicode based fonts across our 22 languages, lack of Indian language keyboards, absence of unicode language rendering engines in mobile phones sold in India are all contributory factors.
     The  third driver is higher credit card penetration. There is a strong link between higher credit card penetration, a flourishing ecommerce system and a vibrant online advertising industry. Online ecommerce players are the ones who get immediate and direct value from online advertising and anything other than the most basic ecommerce requires a user based equipped with credit cards. India has just 10 m unique credit card users- rightfully that number ought to have been 100m + by now. What is holding things up is the absence of a common credit rating system that all credit card issuers have access to. Incumbents drag their feet in joining such shared systems- only firm government mandated action can help here.
     There are good things happening as well.
     After a four year effort,  a new version of the Information Technology Act got passed in December 09 in which online players are granted the status of intermediaries  along the same lines as the Digital Millennium Act in the US and EC Directives on eCommerce. This brings a modern regulatory framework allocating the right balance of liability among all the players in the digital chain.
     Venture capital activity has reached a new high level with companies like Sequioa, Matrix, Draper Fisher and others setting up strong Indian offices. These firms not only bring capital but also insight into what business designs work or not work as well as patience in working with our young entrepreneurs. I only wish wed have more, many more angel investors who would provide the first Rs 20- 50 lacs to get young enterprises started.
     There is frantic government activity on the eGovernance front. Major government initiatives are under way in digital geo maps, online filing of income tax returns, and the bringing of digital era efficiencies to government departments such as Sales Tax and Land Records. Our massive public sector banks are pushing hard now with ATMs, Credit and Debit cards and online banking. Each of these efforts is important because they demonstrate to the lay public the efficiencies of a digital system and make them familiar with the digital world.
     3G mobile phone licensing activity is under way, and we should see launches by the end of this year. With the arrival of smart phones and 3G there is a possibility that India may leapfrog the PC era as we leapfrogged the mainframe era and went directly to PCs.
     In the balance, maybe the glass is after all half-full!
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