Industry Thought Leadership

Blockchain Disruption in the Telecoms Industry

December, 2018
Shahar Steiff
AVP New Technologies

PCCW Global

Mention it and the the odds are that ideas associated with “cryptocurrency” or “Bitcoin” will tend to leap to mind. But in reality, blockchain, or the more generic term Distributed Ledger Technology (DLT), has been in use for roughly a decade and is proving useful in far more diverse situations and industries than just the often overhyped cryptocurrency scenarios - including the telecoms sector.

So what is blockchain, anyway?
The fundamental difference between DLT or blockchain and a traditional database relates to how the data is stored, verified and shared. All data in a traditional database is stored and managed in a central location. Think as an example of a standard Google Sheets spreadsheet. In this case, you are the central owner of the data in the spreadsheet that is hosted by Google. You may keep this data to yourself or share it. You may update the data on the spreadsheet yourself, or you may allow others to update that data through your sharing settings. But regardless of how often you share the spreadsheet or to whom you allow to edit it, there is still only one single centralised spreadsheet into which the data is stored.

By contrast, blockchain utilises more than one complete data source which is spread across connected computers, or multiple “nodes”. Distributed management requires that the logic of managing the integrity of the information within each node and across all nodes must be embedded into the ledger itself, rather than be managed by a central entity that then just stores the information in the ledger.

In this Google Sheets scenario, you don’t own or control a centralised spreadsheet. Rather, all transactions recorded in one Google sheet are mirrored across two, three or even thousands of identical independent Google Sheets. Adding a transaction to any one of those Google sheets will result in that transaction being replicated across all independent Google Sheets or “nodes”.

While traditional centralised management of data may be a good, fast and efficient fit for many scenarios, there are certain cases where blockchain offers features that may be of benefit - including in the telecoms industry.

Consider number porting as an example where blockchain can offer benefits over a traditional centralised database.

Today it’s quite common for a mobile subscriber to have switched from their original operator to a second or even a third operator - while still keeping the telephone number that they were originally allocated. If their number is 054-123-4567 (where 054 represents the dialing prefix of the original operator) the whole number is required to be ported to the new operator.

When someone dials that number, the 054 prefix automatically routes to the original service provider. The original service provider needs to somehow verify whether that number is still on their network before routing it to the correct new service provider, typically for at least some cost.

For efficiency, it makes sense for all operators to keep a database of ported numbers so that when one of their subscribers dials 054-123-4567, they will route the call directly to the new operator. But how is such a database managed and kept up-to-date?

One option would be to use a traditional database, managed centrally. But hold on – who will manage that database? Which operator? Or should a neutral third party be used? Who will pay the cost of operating and administering this database?

The fact of the matter is that today each mobile operator pays a monthly check to one of several third-party companies that manage and administer such databases. In return, the mobile operator is able to query that database prior to routing each call. If the dialled number is found to be ported – the operator is able to route the call to the correct operator.

However, if we were to use blockchain as a number porting database technology, then each mobile operator would be able to run their own identical “node” of a distributed ported number database. Within a set of pre-defined rules, each operator would have access to update the blockchain with the ported numbers on its network. Through the automatic replication of data across all nodes, this information, as well as information updates from other mobile operators reflecting the ported numbers on their respective networks, would rapidly be available at each blockchain instance on each mobile operator’s own systems.

The end result would not be different than using a centralised database, except that the information would now be available locally and would not require a monthly check to be paid to any third-party database operator.

This example demonstrates two major benefits for the use of blockchain: Disintermediation and Decentralisation.

Disintermediation yields simplification and possible cost reductions, while decentralisation fits well in situations where entities operate in an equal-level playing field (such as mobile operators that simultaneously compete and cooperate with each other).

Blockchain has the ability to remove the complexity of information management in such scenarios where the data is no longer managed by a specific entity at a specific hierarchical level, but is now able to be managed by everyone and located everywhere.

Of course, any advantages blockchain technology has to offer hinges on the effective security, data integrity and fraud prevention of the information contained across different independent nodes. To handle these subjects in any depth requires far more extensive comment than is available in this article. However, in general, blockchain technologies do have effective mechanisms to identify fraudulent transactions and to ensure the integrity of stored information.

Overall, rather than having to put your faith in the hands of a third party and having to trust their numbers completely without any transparency or visibility, with blockchain technology all involved parties have the ability to manage their own node and use trusted transactions that ensure the integrity of the information that is generated and consumed.

Of course, using blockchain for number porting in the telecoms sector is just one example where the technology has the ability to yield significant cost-saving and efficiency benefits. The number porting example could easily ignite your own imagination to identify other areas in the industry where blockchain could be of benefit.

In another example, PCCW Global and two other partners successfully demonstrated a proof of concept that makes use of blockchain technology, artificial intelligence and machine learning, with the potential to disrupt the international wholesale voice minute settlement process and dramatically reduce inter-carrier dispute settlement times.

The initiative demonstrated a significant reduction in the time and effort required to identify discrepancies, resolve disputes and generate undisputed invoices for financial settlements - analysing and settling a whole month’s worth of wholesale voice traffic between two major European carriers within less than 4 minutes.

Put into perspective, this process is currently performed manually and typically requires 6-weeks of work from as many as 30 employees at each operator to complete!

Another example could be the maintenance of a global repository of network resources through a distributed catalog. This blockchain database could be used to speed up the process of inquiry, ordering, maintaining, invoicing and settlement of network resources, including connectivity, compute and storage, on-demand across two or more telecom carriers’ networks.

In October, 2018, PCCW Global worked with seven carriers and two technology partners to demonstrate the ability to perform an inquiry, quote and an order across a chain of multiple interconnected telcos - all within less than one minute. In addition, the proof of concept demonstrated the ability to invoice, reconcile SLAs and settle, including financial transactions, across the same chain of multiple carriers, within less than two minutes. Both of these processes typically take weeks of work using manual processes.

If you feel there is a pattern here – you are right!

Being a distributed and non-hierarchical ledger, blockchain is a good fit for wholesale telecom scenarios where the carriers operate in a distributed and non-hierarchical business environment. But it doesn’t end there.

While wholesale is an effective use case, blockchain is also effective in almost any telecom-related supply-chain, even when the ultimate beneficiary is an individual subscriber and the supply chain includes operators, cloud, application developers, on-line stores, POS and banks. Blockchains allows all stakeholders to be linked together to ensure trusted transactions take place and information is correctly stored and retrieved by all parties.

So while cryptocurrencies like Bitcoin steal the daily headlines, it’s the more workaday practical implications of blockchain technologies that are impacting other industries, including telecommunications.

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