Industry Thought Leadership

What are the Blockchain Opportunities in Telecom?

December, 2018
Mustafa Abdelmalik Mohamed
Strategy and Digital Senior Manager

Expresso Telecom Group

The technological hype is keeping everybody on their toes, business professionals and entrepreneurs keeps talking about multiple technology trends and continuously trying to bring it to our realities and transform their businesses and our lives. The blockchain is certainly one of those trends and in fact, one of the most talked about recently with some of its promoters expecting it to be the upcoming technological paradigm shift after the internet.

Blockchain technology is essentially a database that runs an application to validate and share the new entries that usually contains transactions with all the database nodes. The technology is a digital representation of the traditional ledger that stores a sequence of transactions which are linked by using the Cryptography function. Blockchain provides numerous functionalities to its users but the key ones are the decentralization, immutability, security, and transparency. Those functionalities carry on the potential to disrupt the current business models in most of the industries by removing intermediaries, increasing efficiency and open up new opportunities to generate revenues. Theoretically, blockchain can help businesses in different industries to enhance both sides of the profitability equation by increasing revenues and reducing costs.

The blockchain database can be implemented in three access modes, either permission-less / public Blockchain where anyone can participate and execute transactions such like bitcoin. Or, as a private Blockchain where participants need to be invited and authenticated by authorized nodes, and the last access mode which is called the hyper Blockchain and somehow combines the first two access modes.

Telecom, as industry, is not an exception to the blockchain transformation. With telecom players are increasingly uncertain about their future after living a substantial disruption in the last few years due to the introduction of the smartphones and emergence of the OTT (Over the Top) players in addition to the other market influencers such like the intense competition, economies instability, politics, and regulations with the combination of all these factors is creating a clear impact on the telecom industry growth and profitability. So the need to adopt new technologies and business models to enhance revenues and reduce costs can’t be bigger than nowadays. But, how can Blockchain helps telecom operators to do so?

The extent to which blockchain may impact telecoms remains to be seen in the future however adopting blockchain by telecom operators is a reality now with some of them pursuing number of initiatives individually or on a consortium basis. A recent survey that targeted 3,000 C-suite participants from different industries and conducted by the IBM Institute for business value (IBV) in 2017 had pointed out a growing appetite among the telecom leaders toward blockchain. Among the 3,000 leaders, 174 were representing the telecom industry and 41% of them believed that blockchain could support their enterprise strategies while 36% of them are already taking actions and actively engaged in Blockchain activities. Finally, 46% of those who are already active in the Blockchain space did invest in implementing new business models and use cases based on the technology.

The blockchain is promising benefits to the telecom operators but the most obvious and realistic one seems to be the inter-carrier settlement and roaming services. In this case, telecom operators can use the smart contract which is one of the widely known blockchain applications. A smart contract is a digital and secured contract that verify and enforce the contract terms between two or more participants. Telecom operators can build a joint private blockchain network to implement a smart roaming agreement between the HPLMN (Home Public Land Mobile Network) and the VPLMN (Visited Public Land Mobile Network) networks through. Once a roaming transaction is performed then the VPLMN will broadcast the transaction CDR (Call Detail Record) in blockchain to trigger the smart contract that contains the roaming agreement terms which will calculate the transaction charges and the HPLMN will immediately have access to the transaction information to bill the subscriber and perform the inter-carrier settlement online rather than the current manual and offline process. This scenario is expected to reduce losses from roaming fraud cases significantly and improve the customer experience by minimizing the bill shock possibility. Telecom operators can also continue doing roaming together without an intermediary settlement entity which is known as a data clearinghouse (DCH) resulting in a considerable cost saving.

Building on the same business model, telecom operators within the same blockchain network can launch any service that needs seamless inter-carrier settlement process such as remittances services including traditional top-up and mobile money transfer in a secure, efficient and scalable network.

The pursuit of the inter-carrier services based on blockchain is close to being realized by a leading and global blockchain consortium of telecom operators which was announced on September 2017 and called The Carrier Blockchain Study Group (CBSG). The consortium involves some of the big telecom operators globally such like SoftBank, Turkcell, Zain, Etisalat, and other telecom operators as well as blockchain technology companies.

Other use cases can be implemented to streamline many of the complex telecom’s internal operations including the billing and services provisioning, eSIM provisioning, network management and supply chain management. Recently, the Japanese telecom giant Nippon Telegraph and Telephone (NTT) announced the effort to implement a new contract agreement system based on blockchain technology to simplify and decentralize the contracting process with various stakeholders.

IoT (Internet of Things) is another strong use case for blockchain. IoT is increasingly driving the demand to connect devices at a large scale with the sensors of those devices are exchanging sensitive and critical data about the customer’s applications and operations, which is forcing the importance of deploying a high data security measurements. The data security is becoming a very costly element of the IoT ecosystem as well as a very integral part of its success. The promising security features of blockchain makes technology a great platform to manage a secure peer-to-peer network with a high degree of self-management.

A telecom operator-led deployment of IoT platform can use the functionalities of blockchain technology such as the decentralization to speed up the transactions within IoT application and avoid the single point of failure in the centralized deployment, increase the transparency on the state of the network and increase the trust among the stakeholders such like the device manufacturers, platform vendors, operators and users as well. As of now, two major alliances have been formulated to address the intersection of blockchain and IoT which are IOTA Foundation (announced on 2016) and Trusted Alliance (announced on 2017) with the involvement of some of the key IT players such as Microsoft and Cisco but with a noticeable absence from the telecom operators.

On digital revenues side, telecom operators can leverage the customer’s data and trust that they have to provide digital identity-as-a-service. Currently, every service provider whether physical or digital requires proof of identity of the person intending to use the service. The mechanisms to prove the identity varies from showing a physical proof to signing up online, create usernames/passwords and provide personal information. Some of the OTT players such like Google and Facebook are already providing a similar service through their SSO (Single Sign-On) functionality.

Telecom operators can provide a similar service with a key difference that placed them in a better position which is the more trust that they have due to their direct relationship with customers. The telecom operator can build a blockchain platform to create a digital identity for customers when they sign up for their service, the digital identity will use the Cryptography functionality in blockchain which provides authentication services based on the public/private digital key concept. By providing such a service, telecom operators can create a new revenue stream by placing agreements with the various physical and digital service providers.

Of course, metalizing the above-mentioned use cases alongside other potential use cases of the blockchain technology in telecom are facing few challenges. First and foremost is the fact that the blockchain is a new evolving technology and still far from a finished article. As often happened, people attitude toward new technologies is conservative which impact the pace of adopting it. Telecom operators, in particular, are usually hesitant toward big scale of innovation and technology adoption that might require considerable investment in time and money. Regulations are the second major barrier for blockchain adoption, which is the case associated with any innovation that provides wider access to data, the inter-carrier settlement can be a straightforward example to demonstrate the impact of the regulations on accelerating or decelerating the deployments.

Nonetheless, the hype and potential associated with blockchain technology and its use cases within the telecom landscape worth to be seriously explored. Telecom operators should seek involvement in blockchain communities through partnerships or consortium models which are becoming increasingly available. Such involvement will increase the familiarity with the technology and its use cases as well as clarity on the steps required to implement the proof of concepts to demonstrate the previously discussed benefits. More importantly, telecom operators need to show a better attitude toward the risk of investing in new technologies which yet again could be a major pullback factor in the pursuit of the digital era.

References

  1. GSMA intelligence (2018): Blockchain and distributed ledgers technologies: What’s the value for IoT?
  2. C. Idamakanti, K. Bhardwaj (2017): Catering the Telecom Conundrum of Revenue Leakage: Blockchain- A Business Paradigm
  3. A. Bakre , N. Patil, S. Gupta (2017): Implementing Decentralized Digital Identity using Blockchain
  4. ITU News (2018): How telecom companies can take advantage of blockchain?, https://news.itu.int/telecom-companies-blockchain/
  5. Rob Van Den Dam (2018): Bringing blockchain to telecom, https://inform.tmforum.org/internet-of-everything/2018/01/36559/
  6. C. Kim (2018): A Japanese Telecom Giant Wants to Use Blockchain to Store Contracts, https://www.coindesk.com/a-japanese-telecom-giant-wants-to-use-blockchain-to-store-contracts
  7. D. Bubley (2018): How Blockchain will impact the telecom industry, https://www.ptc.org/2018/06/how-blockchain-will-impact-the-telecoms-industry/
  8. IBM Institute for Business Value (2017): Reimagining telecommunications with blockchains
  9. Deloitte (2016): Blockchain @ Telco: How blockchain can impact the telecommunications industry and its relevance to the C-Suite
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