Archive for October, 2009

Per Second Billing Does Not Portend Financial Ruin for Mobile Network Operators: Part-2

Thursday, October 29th, 2009

Part-1 of this blog post explained how per second billing does not portend financial ruin for mobile network operators. It pointed out that, depending on whether MNOs apply their per minute tariff to bill on a per second basis or not, call charges may or may not reduce.

This Part-2 weighs in on the various options available to MNOs by which they can not only prevent a fall in their revenues but can actually harness per second billing to drive the next level of revenues while simultaneously providing greater choice to their subscribers.

In case MNOs apply their existing per minute tariffs to bill on a per second basis, call charges will reduce for call durations exceeding one minute. However, this doesn’t have to mean a drop in their revenues: MNOs could use the lower charges to bolster market penetration and add more subscribers – just as they’ve done in the past. Despite slashing per minute rates from around INR 16 to less than a rupee in the last 15 years, many MNOs became multibillion dollar corporations by increasing their subscriber base from a few tens of thousands in 1995 to around 450 million now.

On the other hand, in case MNOs feel that the Indian mobile phone market is nearing saturation, they might conclude that a lower tariff wouldn’t result in an expansion of the market. In that case, they can turn to their peers in other mature markets and find ways to protect and grow their revenues. Let’s look at a few possibilities.

Most regulators, including India’s TRAI, don’t mandate any specific tariff, so MNOs are free to hike their per minute charge – like many have done abroad. According to one report, “subscribers would now be charged for actual airtime utilised at a higher rate. This compares to the per-minute billing system, where subscribers are being charged for unused seconds in a minute, resulting in some level of subsidisation of the rate, [that is, more seconds billed at a higher rate]”. Under this option, MNOs could bump up their tariff from the current (say) 60 paise per minute to (say) 70 paise per minute and protect their revenues, albeit forcing customers to shell out more for their mobile phone usage.

If MNOs don’t wish to do this, they still have the option of introducing new tariff plans on a per second basis.  Let’s take a few examples of alternative per second tariff plans. The most intuitive plan (say, PLAN-1S) would carry a per second charge of 1 paisa, the figure derived by simply prorating the present charge of 60 paise per minute (say, PLAN-0M). 

What is not obvious and hasn’t found any mention in all the media reports I’ve come across is that MNOs can very well come up with other plans with a higher cost per second viz. PLAN-2S (1.1 paise per second) and PLAN-3S (1.25 paise per second), to quote two examples. This is not as far-fetched as it sounds for there are several precedents from MNOs abroad for such differentiated tariffs. To quote from this report, “be aware that per second billing rates are higher than packages charged at per minute rates!”. For the sake of simplicity, we’re avoiding variations in the fixed monthly fees between these plans, although that’s not so uncommon in practice.

When we compute call charges for a range of call durations according to each of the above tariff plans, we notice that per second billing is not always cheaper than per minute billing. As you can see from the following chart, short calls will be cheaper with per second billing whereas chattier callers might be better off staying with their present per minute tariff and billing plans.

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(Click here to download the Excel-based mobile phone call charge calculator.)

Therefore, it’s evident that call charges –  and MNO revenues – depend more upon how long calls are and how tariff plans are structured, so per second billing does not automatically mean drastic drop in MNO revenues. 

billshrink03_300wGoing forward, MNOs in India will likely follow their overseas brethren and come up with different plans with varying tariffs for different pulse rates and leave it to the customer to decide what’s best for him / her depending upon on his / her individual usage pattern. We’re familiar with per minute billing and are now coming to terms with the per second paradigm. Going forward, we might encounter ‘per 6 second billing’ and ‘per 30 second billing’, which are two other pulsing rates that have been used abroad. When that happens, selecting a mobile phone plan can become very complex and subscribers might need call charge calculators and comparison shopping websites like BillShrink (USA), MoneySuperMarket (UK) or BilligerTelefonieren (Germany) to try out various options and select the most cost-effective plans for themselves.

Per Second Billing Does Not Portend Financial Ruin for Mobile Network Operators: Part-1

Monday, October 26th, 2009

Tata DoCoMo recently launched it’s GSM service with per second billing around two months ago in India. To a market used to per minute billing all along, this was the first taste of per second billing. Not surprisingly, there’s been a lot of buzz in the media around how per second billing would lead to cheaper mobile phone calls and, as a corollary, result in financial ruin for mobile network operators should they follow suit with similar tariff plans of their own. In fact, the stock  price of Bharti, India’s largest MNO with 110 million subscribers, crashed 15% in the Bombay Stock Exchange one day after rumors surfaced – and later denied – that India’s telecom regulator was going to force all MNOs to switch over to per second billing.

According to the logic used in various media reports, a 20 second call would cost 20 paise under per second billing, drastically lower than the 60 paise that it currently attracts under a typical 60  paise per minute plan with per minute billing (for those who are not familiar, ‘paisa’ is one-hundredth of rupee (INR), India’s major currency, and ‘paise’ is its plural; in other words, paisa is to rupee what cent is to dollar). Therefore, according to these reports, revenues of MNOs will fall drastically if per second billing becomes the norm.

This logic is flawed.

When I had a per second billing plan in Germany in the early years of this decade, I recall that the first minute was always charged in full regardless of the actual duration of the call. In other words, per second pulsing happened only from the second minute onward. This seems to be a common practice even now, as you can see from these examples of per second billing plans in Africa and Canada. So, the 20 second call in the above example would be charged 60 paise, regardless of whether the billing happened on a per second or per minute basis.

Now, let’s consider call durations exceeding one minute. Depending on whether MNOs apply their per minute tariff to bill on a per second basis – thereby charging 1 paise per second – or not, call charges may or may not reduce.

Regardless of the tariff, MNOs have several options by which they can not only prevent a fall in their revenues but can actually harness per second billing to fuel the next phase of their market penetration and revenue growth while simultaneously providing greater choice to their customers. Part-2 of this post will cover some of these options. Watch this space!

Midomi Does A Shazam For Live Music

Tuesday, October 20th, 2009

Midomi recognizes live music – even if you and I hum it! And, given my modest singing capabilities, it seems to be doing a good job of this!!

Available on PC and iPhone, Midomi records ten or more seconds of the song you hum and gets back within seconds with a list of guesses.

I began my test drive of Midomi by humming the opening bars of Stairway To Heaven by Led Zeppellin. Midomi got it right.

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Encouraged by this success, I hummed the opening bars of a few more songs selected from the list of my favorite songs one after the other. Here are the results.

 # Track Artist Genre MIDOMI Result

Round 1

MIDOMI Result

Round 2

2. Can’t Find My Way Home Blind Faith Rock FAIL  
4. Children of Sanchez Chuck Mangione Jazz FAIL  
5. Land Of Make Believe Chuck Mangione Jazz FAIL  
6. Take Five Dave Brubeck Jazz FAIL FAIL
7. From The Beginning ELP Rock FAIL  
8. Take A Pebble ELP Rock FAIL FAIL
10. Thick As A Brick Jethro Tull Rock FAIL FAIL
11. Dun Ringill Jethro Tull Rock FAIL  
15. One White Duck Jethro Tull Rock FAIL  
17. Skating Away Jethro Tull Rock FAIL  
20. Moonchild King Crimson Rock PASS  
21. Stairway To Heaven Led Zeppelin Rock PASS PASS
22. I Love New York Madonna Pop PASS  
23. Dark Side Of The Moon Pink Floyd Rock PASS  
24. Wish You Were Here Pink Floyd Rock PASS  
25. Behind Blue Eyes WHO Rock PASS  
  PASS RATE 37.5% PASS = 6; FAIL = 10

 moonchild_midomi_01_500w

When I noticed many PASS results after  a series of FAILs, I started wondering if Midomi was able to “train” itself to understand my voice better over a period of time. This was evidently not the case since the results didn’t change when I made a second attempt with a few songs. 

While a 37.5% PASS rate might not be worth writing home about, the following facts should be borne in mind before judging Midomi. Midomi is a newly launched service still in BETA and its recognition rate is likely to improve over time as it accumulates a larger collection of songs; besides, the ability of Midomi to recognize a song depends very much on how well you hum it –  I may be humming what I think is Jethro Tull’s Thick As A Brick, others may not agree, so Midomi can’t be faulted for getting it wrong!

Midomi reminded me of Shazam, a UK-based mobile phone based service that recognized recorded music when I tried it a few years ago.  In a blog post at the time, I’d written about how Shazam had correctly recognized Gift of Roses by Jethro Tull. Just for comparison, I tried humming this song on Midomi – it failed to recognize it.

giftofroses_midome_01_500w

It has to be noted that, then, as well as now, Shazam recognizes only recorded music. Unlike Midomi, Shazam doesn’t recognize live music let alone songs hummed by you and me.

Let me offer a couple of suggestions for Midomi.

After failing to recognize a song, Midomi should ask the singer to issue a PASS / FAIL verdict immediately. In case of FAIL results, if Midomi asks the singer to enter the correct song details right then, it will be able to enrich its collection much faster than through its present method of calling users for a separate recording. As noted earlier, a rich collection of pre-recognized songs is a critical success factor for Midomi going forward as it seeks to improve its recognition rate.

When Midomi correctly guesses a song, it should issue a badge of recognition (pun intended!), which you could wear with pride to silence your critics (spouse / parents / children / friends) who keep accusing you of mutilating songs you believe you’ve hummed correctly.

Indian Education System for NYC?

Tuesday, October 13th, 2009

In my early blogging days, I’d written a blog post called Indian Education System is the Best … for India!

In a recent FORTUNE magazine interview entitled “The CEO Educator”, Joel Klein, the New York City School Chancellor, acknowledges “colleagues who are using tutoring services where kids get online with people in India tutoring them in math.” His comments later in the interview make you wonder if the stress-filled, exam-packed Indian education system is what Klein is ordering for the New York City public school system!

Joel Klein is widely credited with turning around the deteriorating public school system in NYC in the four years that he has been in charge of it. Graduation rate has zoomed up from 47% in 2005 to 61% in 2008 and dropout has fallen eight points from 22% to 14% during the same period.

In charting the course for bringing about further improvements, Joel Klein cites lack of immediacy as the greatest challenge. He’s wary of the tendency of middle-class and affluent parents to take good education for granted and is very critical of their concerns regarding testing-induced stress upon children. You can make out that he’s a strong supporter of testing when he says, “our kids are going to grow up in a world with high-stakes testing at every level, high-stakes challenges in a very aggressive global economy.”

By acclimatizing children to the stress of tests and exams, an education system prepares them to slug it out in a future economic landscape that fits Klein’s description. While knowledge can arguably be acquired only in a relaxed environment free of continuous evaluation, schools have to do more than just impart knowledge. They have to equip children with the tools to capture knowledge on an ongoing basis, get jobs, build careers and contribute to the overall growth of their nations in an increasingly competitive world. And, to do all that, testing is indispensable – something that Indian educators were evidently convinced about while laying the foundations of the Indian education system long ago.

With Joel Klein’s comments resonating with their own convictions, hope Indian educators allow the Indian education system to continue to deliver its proven results, and dismiss demands from some quarters for eliminating tests and exams from schools and universities. Instead, they could use their collective energies to improve the quality of assessments, prevent leakage of question papers and streamline the overall process of administration of tests and examinations.

Click or Call?

Wednesday, October 7th, 2009

RedBeacon and Yext were arguably the two most successful companies at the recently concluded TechCrunch50 conference for startups: RedBeacon won the first prize and Yext scored a big US$25 million round of VC funding after its demo at the conference.

RedBeacon enables consumers requiring a service to find and interact with local businesses and professionals. Going beyond displaying business listings and ratings that are the mainstay of any number of yellow pages like services, RedBeacon helps consumers receive price quotes and finalize deals online.

Yext bills itself as the Next Yellow Pages that brings in hot leads to local businesses via phone calls. No clicking here – businesses pay Yext only when they receive live telephone calls.

RedBeacon places a lot of emphasis around total online fulfillment – service requestors can complete the entire transaction online without lifting the phone. It uses this and a few other features to differentiate itself from a clutch of competing web-based service providers like AmericanClassified, StartLocal and LookIyer.

Whereas Yext says that small businesses prefer receiving phone calls rather than emails or website hits and claims its pay-per-call – rather than pay-per-click – pricing model as its USP.

From the side of the service requestor, RedBeacon stresses click-not-call. Yext says exactly the opposite – call-not-click – from the service provider’s perspective.

Interesting contrast in go to market themes!

Seller Side Auctions Gaining Traction: Part-2

Sunday, October 4th, 2009

Following on Part-1 of this blog post, I’ve still not been able to get the JavaScript of the MoneyAisle Interest Rate Ticker to work (click here to see work  in progress), so I’m settling for this screenshot displaying realtime interest rates for certificates of deposit and high-yield savings deposits.

MoneyAisle_LiveTicker_01_400w

Turning to the rationale behind the founding of TransFS, its FAQ section says, “Our own frustration (we’ve been in your shoes) with the financial services shopping process showed us that there was a need for a better way to procure small business financial services.  When we didn’t find anything that we deemed to be doing a good job of solving this problem we decided to build TransFS”.

Even then, on the face of it, it would appear that small businesses would have the necessary time to scour the market and possess the required clout to request, and get, quotes from credit card processors. So, why would small businesses sign up with TransFS when they could simply continue with their current practice of getting quotes directly from respective vendors for most of their other needs? In his comment to my previous blog post, Eric Olson, Co-founder and COO of TransFS.com, has clarified that there are over 800 independent sales organizations (ISOs) offering credit card processing services in the United States. Assuming that credit card processing is a commoditized service where all ISOs are similar in terms of quality, service, etc., it does make sense for small businesses to turn to TransFS as a one-stop shop to obtain lowest quotes from a large supplier base.

Before we see how low a quote a small business can get from TransFS, let’s have a quick look at its operating model.

TRANSFS_HowItWorks02_400w

Like I’d done in the case of MoneyAisle, I ran a live auction on TransFS. As you can see from the following picture, COCARD was the lowest bidder with a quote of US$ 231 per month.

TRANSFS_Results01_500w

I also got comparative quotes from CreditorWeb, a leading conventional comparison engine. The lowest quote there was US$ 253.20 per month from Charge.com.

CreditorWeb_Results01_500w

Not only has TransFS found the lowest bid but, interestingly, even its next four bids ranging US$ 236 to US$ 246 per month, are cheaper than the lowest quote on CreditorWeb. While this is by no means an exhaustive comparison, it surely lends strong credence to TransFS’ claim that it helps small businesses save a lot of money on their credit card processing costs.

With such a powerful and easily-demonstrable proof point of its core value proposition, and its early-mover advantage, TransFS looks well-placed to lead this market.  How well it’s able to reach out to the market to sell this message to a critical mass of small businesses while simultaneously assuring them of quality, service and many other factors that play an important role in their selection of a credit card processor will determine how successful TransFS will become in achieving its vision of revolutionizing the  market  for procurement of credit card processing services.

PS: As an aside, I noticed that, in a recent auction on MoneyAisle, the highest rate for a high yield savings deposit was 1.75%. Contrast this with 4.36% I got last December for a similar amount! This is a sure sign that the market is awash with liquidity. Do we need any more proof that the last year’s credit crunch is history?

Seller Side Auctions Gaining Traction: Part-1

Saturday, October 3rd, 2009

Around the end of last year, I’d written a post about MoneyAisle, the pioneering provider of the novel realtime seller-side auctions for savings products. Its rapid growth over the past year  –  $1.65 billion worth of auctions and $100 million worth of certificates of deposit and high-yield savings deposits  – suggests two things. One, in a sputtering economy, Americans increasingly turned to relatively safe savings instruments like CDs and high-yield savings deposits to park their surplus funds. Two, they found it convenient to shop for these instruments through a frictionless buying process pioneered by MoneyAisle.

This trend seems to be catching on in Europe as well, going by a spate of MoneyAisle-like websites launched during the last twelve months there – MaxBips in the UK, Spaarbod in The Netherlands and Licuro in the UK, Sweden, Luxembourg, Belgium, The Netherlands and Germany.

For a quick recap of the seller-side auction model pioneered by MoneyAisle: Buyers of savings products simply keep their wallets ready; banks offering such products slug it out in a realtime auction amongst themselves to win the business. Beneath the surface, this might not seem very different from online price discovery models that are commonplace among air tickets, hotel rooms, car rentals, and other perishable product categories. In my previous post, I’d commented that, even so, this model offered a vastly superior customer experience in financial services and had predicted that it could spread beyond bank CDs and high-yield savings deposits to cover credit cards and other products and services compared routinely on MoneySupermarket, Filife, Bankaholic and other conventional comparison sites using relatively stale static data.

Seems like my prediction has started coming true!

TransFS has just launched a realtime auction website for procurement of credit card processing services. On its website, TransFS (Transparent Financial Services) claims that small businesses can save 40% on average on their credit card processing costs by using its unique auction process and comparison engine.

TransFS has also announced that it will be soon launching realtime auctions for Property & Casualty Insurance, Health Insurance, Business Credit and Payroll Processing.

It would be interesting to watch the go to market strategy and adoption rate of TransFS. Unlike MoneyAisle and the crop of websites in Europe who cater to the consumer, TransFS targets the small business market. As against more than 8,000 banks offering savings products, there are only fewer than 200 837 (source: TransFS Credit Card Processing Directory) credit card processors in the United States. In other words, the number of demand and supply side players is very limited in the case of credit card processing and other services served by TransFS, compared to those offered by MoneyAisle. As a result, it might be a big challenge for TransFS to sign up small businesses to its platform when they could simply continue their current practice of getting quotes directly from credit card processors (and health insurers or payroll processors, as the case may be).

PS: In Part-2 of this post, I’ll bring you more details of the rationale behind the founding of TransFS and the results of a live auction I ran recently on it. By that time, I should’ve ironed out a few technical issues and be able to publish MoneyAisle’s live interest rate ticker. Stay tuned…