The year 2016 was dubbed as the year of blockchain by several analysts. Going into the New Year, surveys show that technology, media and telecom industries are possibly the most aggressive investors in blockchain. CommsMEA talks to experts about the potential of the technology, touted as the internet of money, to transform the future of telcos.
Dr. Raymond Khoury, executive vice-president, Booz Allen Hamilton
Dr. Najwa Aaraj, senior vice president of special projects, Dark Matter
Diego de Miguel, partner, Oliver Wyman
Leonard Kore, senior research analyst, telecom and networking, Africa, IDC
CommsMEA: How could blockchain disrupt telecoms?
Dr. Najwa Aaraj: Blockchain is ultimately a distributed, immutable log of events. When harnessed properly, it greatly facilitates reconciliation of event history between two or more different entities. Any portion of the telecom industry that ties up assets during reconciliation would benefit - including, but not limited to, account transaction history, account usage history, roaming charges reconciliation, billing systems and MVNO accounts reconciliation.
Dr. Raymond Khoury: Blockchain technology can ensure that the telecom industry becomes the ‘secure funds or secure document delivery’ service provider’ of choice. With hundreds of millions of mobile subscribers across the region, and a growing number of expat blue collar workers frequently remitting monthly payments to their families back home, telcos can ensure that secure blockchain transaction facilities become the preferred option for workers to use. Also, with a transition to mesh networking by telecom providers, where smart phones almost function like individual cell towers, blockchain technology can make authentication and security solutions possible for such decentralised networks.
Leonard Kore: The key value proposition offered by blockchain technologies is data integrity in a distributed database that cannot be altered/manipulated by unscrupulous third parties. Robust data integrity provided by blockchain enables telcos to reconsider IoT. For example, with blockchain data being transmitted between sensors, machines or other IoT devices are secured and their data integrity is ensured. Another use case is ensuring integrity in identity management i.e. in digital records such as call records or mobile money data, especially when required by law enforcement. Lastly, as we approach the e-Sim era, authentication between different telco networks and smartphones will be made much easier with blockchain.
Diego de Miguel: The trend is to move from a centralised and ‘member controlled’ set of bodies to guarantee traceability and integrity of those transactions to a distributed set of players that adhere to a set of algorithms. In that sense there is a move from a centralised IT and operations stack within organisations to a more ‘network -based’ or distributed functionality. In that respect the impact for telecom operators is meaningful as it opens up a series of opportunities (as well as other less relevant threats).
Amongst the opportunities come the window of opportunity to serve financial and industrial companies in the IT and networking technology transformation required to unlock the blockchain potential. Amongst the threats a set of highly specialised IT services and premium networking services might come under threat as companies adopt a more ‘internet like’ kind of service.
CommsMEA:: Why should telcos think of investing in blockchain?
Dr. Aaraj: Blockchain can greatly reduce the period of time that assets are tied up while account histories are reconciled.
Dr. Khoury: Many argue that the future of communication networks lies in mesh networking - an innovative and radical form of data sharing that in effect turns individual smartphones into cell towers. Blockchain technology could potentially be used for authentication and security on these decentralised networks. In terms of improving network infrastructure, blockchain, as with all of its other functions, will improve security with added transparency, reduce costs with a more decentralised approach to connectivity, and increase performance and efficiency with a platform that is contactless and extremely swift.
Kore: Besides the tremendous value blockchain adds to IoT and mobile money, telcos should invest in blockchain because it will enable them to ensure their digital transactions and records are incorruptible, unchangeable and highly secure. Blockchain can also simplify billing and roaming mechanisms for telcos. Mobile number portability will also be simplified especially in the e-Sim era as will smart contracts between different network providers, suppliers, 3rd parties etc.
It can also help telcos reduce costs by using blockchain based technology in digital transactions or mobile money enabling lower transaction costs and improve efficiency in internal operations such as OSS/BSS processes.
de Miguel: Like it happened with payment or supply chain and e-commerce platforms, in the blockchain ecosystem too, telecom companies can actively participate in shaping standards, value chain roles and generally pushing adoption through small and medium enterprises via opex models in their product offering. In the high end of the market they can take the role of technology advisory to guide corporate clients through this transition.
CommsMEA: What are the various ways the telecom industry can make use of blockchain?
Dr. Aaraj: Areas for which the telecom industry should consider deployment of open or public and/or permissioned or private blockchains include, for example, billing, eSIM provisioning, number portability, roaming subscribers’ authentication, device-to-access point secure communications, micropayments in exchange for use of digital assets, automotive environment, smart charging stations, smart meters, subscriber-to-subscriber money transfers, secure handling of electronic health records, and H2H/H2M/M2M identity management.
Kore: The key telco use cases as are mobile money and digital payments transactions, improved IoT networks through shared blockchain platforms, smart cities, healthcare, call data integrity and identity management, operational efficiency and cost savings; and smart contracts provisioning to ensure faster and cheaper ways to auto-complete transactions and business processes.
de Miguel: Telcos can take several roles in the value chain from algorithm developers or holders to trusted platform or solution providers to technology advisors.
CommsMEA: What will be the buying model for blockchain technology? Will it be pay-as-you-go or otherwise?
Dr. Khoury: Blockchain’s applications are numerous and varied, extending beyond cryptocurrency and are known by most as the public ledger of Bitcoin transactions. As such, the pay-as-you-go model will be more prevalent versus a monthly or annual subscription of sorts.
Kore: Pay-as-you-go models will be the ideal business model for blockchain. Leading blockchain players such as Ethereum are already using pay-as-you-go models enabling users to only pay when functions or data is executed enabling users to control costs of accessing the service.
de Miguel: The model will change across clients and applications. One could foresee a major capex transformation project led by daring corporates or market infrastructure providers, such as recent talk from Australian exchange for instance, whereas smaller companies with a more opex-oriented mentality would prefer telcos to offer these services on a platform’or licence basis.
CommsMEA: Is there any way blockchain can facilitate a new revenue source for telcos?
Dr. Aaraj: As a major emerging set of technologies, IoT will enable new business models that telcos, in particular, can take advantage of. Blockchain enables IoT devices to perform transactions, and to be tracked relative to time and location. Mobile phones provide a natural hub for such operations. A phone can be used solely as a geo-locator, communications conduit, and storage medium by resource-constrained IoT devices. In some instances, the IoT devices also leverage the phone they are paired with for trusted execution and analytics processing as well.
Dr. Khoury: Blockchain technology opens up new revenue sources for telecom providers, specifically in the mass money transfer business. Beyond this, blockchain technology applications that drive the smart city vision across sectors such as transportation, financial services and healthcare offer telecom providers new industries to service and also create additional revenue sources.
Kore: It can unlock new revenue streams for telcos such as they can offer services such as identity management solutions to other providers or partners. This can be in the form of telcos having superior blockchain platforms capable of providing trusted data management, storage and verification as-a service solutions to users. Other revenue sources include implementations in mobile money, micro-payment solutions, cross border remittances, smart contracts, and IoT.
de Miguel: This would open the door for specialised network solutions adding value to connectivity through protected and encrypted communications as well as technology advisory.
CommsMEA: If you were asked the single value proposition that would convince the CFO to give a nod to investing in blockchain, what would that be?
Dr. Aaraj: Reduced transaction time, cost, and complexity achieved through suppression of current intermediary entities and processes.
Dr. Khoury: Blockchain technology offers an organisation a decentralised transactional computing power with authentication and security embedded, all within full autonomy of the user.
de Miguel: This is a must have, you would not be able to hide from this trend in the near future and this would provide you with competitive advantage in transaction costs and time to market.