Sohag Sarkar, Management Consultant & Telecom Advisor
It was almost a decade back in 2008 when Satoshi Nakamoto unveiled a disruptive technology that aimed to carry out peer-to-peer digital transaction without the need of an intermediary. The 3-Bs that were the highlight of this phenomenon include: Blockchain (the disruptive technology), Bitcoin (the cryptocurrency), and Banks (the intermediary).
The hype and hoopla of the cryptocurrencies (a digital currency that uses encryption techniques to regulate the generation of currency and verify the transfer of funds; one that operates independent of a bank) is ever-growing. However, industry stalwarts have started to acknowledge the widespread (positive) ramifications of Blockchain technology which is here to trigger the next wave of disruption.
Simply put, Blockchain is a way to create a digitally distributed and secure database that is used to maintain a continuously growing list of records (blocks). These blocks are chronological, time-stamped, and linked to the previous block. By design, Blockchains are inherently resistant to modification of the data (irreversible and auditable). It is typically managed by a peer-to-peer network (architecture) collectively adhering to a protocol for validating new blocks. Blockchain is the DNA of a transaction.
Different types of Blockchains have emerged based on the accessibility to (or authority on) the transaction processes (Send, Approve, and Read).
Process View of Blockchain
Public blockchain. Open source and not permissioned; which means that everyone can be part of them and explore them. Example: Bitcoin, Ethereum.
Federated or consortium blockchains. Not everyone is allowed to participate in the verification of transactions. They are faster (higher scalability) and provide more transaction privacy. Consortium Blockchains are mostly used in the banking sector. Example: R3, Hyperledger.
Private blockchain. Write permissions are kept centralized to one organization. Read permissions may be restricted to an arbitrary extent. Example: Manox, Ripple.
Relevance to Telecom Industry
Blockchain has emerged as a disruption technology and like any techno-savvy industry the telecom sector must do early experimentation to take the early mover advantage. It provides the opportunity to not only transform their hitherto transaction capabilities (internal processes as well as with third parties) but also facilitate the development of innovative and revenue-generating products and services. It may serve as a game changer in the near future. There are multiple use cases that may evolve for the telecom industry.
Products and Services
Identity management. Telcos spend 25 to 150 per subscriber for verification. Blockchain may present a unique opportunity to turn this cost into revenue with identity management services for their subscribers. Using an eSIM or App, virtual identities may be encrypted and stored in the Blockchain; which may be used by the subscribers to authenticate their identity on partner websites. The subscribers are therefore, not required to duplicate their identity across multiple websites; nor remember different usernames and passwords.
Connectivity or WiFi. A cost-effective means of authenticating and accessing public WiFi or other networks and enabling payments between user devices and access points.
Data management. Blockchain can provide storage and authentication of digital records. Example: Legal, property, academic, or professional records.
Mobile wallet. With India being the number one country for global money remittances; an international mobile wallet service in collaboration with partner telcos may be a win-win proposition.
Internet of Things (IoT)/M2M. Telcos may solve the security and vulnerability concerns of IoT/M2M devices by adopting Blockchain; thereby enabling highly secure peer-to-peer self-managed mesh networks using a sufficiently large number of nodes (or IoT sensors or eSIMs).
Smart cities. Blockchain presents wider use cases within smart cities: authentication, payments, asset management, IoT, etc.
Healthcare. Effective management of electronic health records (EHR) for the customers.
5G connectivity. The 3GPP and non-3GPP access networks could be connected via a Blockchain network where each access point can serve as a node in the network. The device can ascertain the best node to provide services (basis rules and agreements as defined in the flexible smart contracts).
Digital assets or rights. A Blockchain of digital rights for consumer products (purchase of music, news/articles, mobile games, gift cards, or loyalty points) could ensure that artists or authors are paid immediately once a consumer reads an article or listens to a song; with funds proportionally distributed as per contract.
Operational Improvement and Risk Management
Roaming (international, intra, or inter circle). Blockchain technology can enable telcos (or MVNOs) to automatically enter into micro contracts for roaming services. This may do away with the need for an intermediary like Roaming Clearing houses.
Number portability. Blockchain can impact the operating model of MNP Clearing houses.
Internal OSS/BSS processes. Telcos may use hybrid Blockchain to define a private network for a more efficient billing system, SIM provisioning, and to accurately track usage of network and instantaneously charge their subscribers.
Fraud management. Telcos may eliminate roaming and wholesale fraud using smart contracts.
KYC. In collaboration with cross-industry players (banking, insurance, credit rating agencies, etc.), telcos can remove the duplication cost to carry out KYC checks (or AML compliance) for mobile wallets by deploying a Blockchain-based KYC registry.
Blacklist registry. Telcos can share a common list of blacklisted customers or devices or identities to minimize fraud.
India has been open and receptive to the use of Blockchain technology unlike some of the advanced economies of the world. The Indian banking sector has already seen its adoption. One such example is the successful completion of the first Blockchain project under the umbrella initiative named BankChain – a consortium of banking majors namely SBI, ICICI Bank, and DCB Bank. The Reserve Bank of India's research arm is also said to be involved in its first ever end-to-end test of the technology along with other stakeholders of the country's financial system.
Blockchain has the potential to transform the traditional business and cross-industry operating models. With the hype associated with Blockchain also comes uncertainty around how the new technology will be regulated. Taking cue from global references, it would be prudent that:
- The regulator introduces a consultation paper or pilots a Blockchain project to address a genuine use-case.
- Telcos looking to expand their digital business may partner with other companies to develop and implement Blockchain-based solutions or invest in their research or incubation funds.
- All the relevant players (operators, hardware or device manufacturers, software companies, cloud service providers, system integrators, OTTs, etc.) within the telco value chain together with cross-industry partners must collaborate to jointly define new products and services.
Needless to mention, in the long run telcos that introduce their own Blockchain-based products are more likely to benefit from this disruptive technology.