Commercial blockchain ‘months away’ from real-life applications in wholesale
After months of trials, blockchain will be used commercially in the industry in 2019 in a $13bn market, leaders tell Alan Burkitt-Gray. Meanwhile blockchain is also moving into bandwidth-on-demand and voice routing
Companies in the industry could be using blockchain technology to process wholesale voice settlements in 2019, according to a number of senior executives in a position to know. Their determination follows successful proofs of concept by the wholesale units of six leading carriers – Colt and PCCW Global at first, later joined by BT, Orange, Telefónica and Telstra.
The executive chairman of Clear Blockchain Technologies, the company providing the back-end for the settlements, agrees. “We want to launch a production network at the end of the first quarter of 2019,” Eran Haggiag told me. “That’s assuming very strong collaboration with the telcos – and that would be the fastest date to a production network.”
At our Capacity Europe event in London in October 2018 (pictured) executives appeared confident that the blockchain system would be in commercial operation for transactions by the end of 2019.
“Next year,” said Pierre-Louis de Guillebon, CEO of Orange International Carriers. “Next year is realistic,” agreed Eduardo Guardincerri, CMO of Telefónica. Both were responding to a question from Jussi Makela, who was moderating a panel at the conference. He is director of the International Telecoms Week (ITW) Global Leaders’ Forum (GLF), the industry organisation that has run the proofs of concept since the project began a year ago at the 2017 Capacity Europe event. (Full disclosure: Makela is part of the team at Capacity Media, the company that publishes Capacity and produces Capacity events and ITW.)
“When will you settle the first live transaction?” Makela asked the panellists at the conference. Marc Halbfinger, CEO of PCCW Global and chair of the GLF, said: “We introduced this topic at this event one year ago. In less than 12 months look at what we’ve achieved. Instead of settling in one to three months it’s two to five minutes. This is a huge achievement.”
But wide adoption for blockchain-based voice settlement “depends on the industry getting on board”, he said.
John Sullivan, head of global voice at Telstra, was bullish about a go-live date for commercial operation: “Probably in March next year,” he said.
Halbfinger warned that it made sense only if the approach was “adopted by the whole industry”. The GLF “wants to move forward collectively as an industry body”. Before that can happen, the industry needs a common interface, he said.
Louisa Gregory, chief of staff at Colt, said her company wanted to move to blockchain technology because “we have a large base of capital markets customers that are already looking at this technology”.
I spoke to Haggiag the week after Capacity Europe. “Wholesale voice is moving towards a production network,” he told me. “We see very strong interest. Other companies that were not part of the proofs of concept are interested in joining the production network. This is very encouraging as one of the challenges is how to make the most out of this technology.”
There needs to be wide participation across the wholesale voice industry for it to be successful, he suggested. “At the moment we are working just with GLF members. There is strong interest in these companies. Once there is a critical mass, others will want to join.”
What is a critical mass? Haggiag put some figures on it, comparing the still unnamed telecoms blockchain system with Ripple, a payments network for money transfer run by banks.
Haggiag believes that the GLF network could have 150 members using blockchain for wholesale voice settlements by the end of 2019. How big is that market? “It’s around $13 to $14 billion a year based on the information we have,” said Katia Gonzalez, head of fraud prevention operations and services at BICS.
Meanwhile, said Haggiag, Clear Blockchain Technologies is looking beyond wholesale voice to other sectors of the telecoms industry. As well as the GLF, Clear has been working with the MEF – the former Metro Ethernet Forum – on a number of proofs of concept that were shown at its conference in late October.
“We showed bandwidth on demand, quoting price in real time as well as execution and delivery monitoring, invoicing based on monitoring and then payment – all based on blockchain.”
This proof of concept involved Liquid Telecom, PCCW Global, Sparkle, Singtel and Tata Communications. “We took its product catalogue from each company and showed how in real time you can ask for prices.” That included services that one company took from another’s catalogue to offer to the prospective end user, without showing details. “You can give an aggregate quote. Today that takes a week or more.”
Why do you need blockchain for that? “You don’t want a central register of services,” explained Haggiag. “Each company exposes its services only to partners and then aggregates delivery and creates automatic settlement and creates cryptographically signed invoices.”
How will blockchain be implemented across the wholesale industry? “It makes most sense that there will be one network for telcos, working together,” Haggiag told me. “There could be multiple vendors, but then you would need standardisation and open APIs to enable multi-vendor systems to be interoperable. If the markets adopt it by the end of 2019 it will be a very big blockchain system – something that the telecoms industry can be proud of.”
Clear has also worked on blockchain applications for industries such as energy, insurance, pharmaceutical and advertising, but “our main focus now and almost all of our resources are tuned into the telecoms industry and the successful launch of the production network”, he added. He wants to get to 50% of the wholesale voice market “as quickly as possible”. He added: “Once we reach that we’ll be able to go back to other markets.”
Separately, Telefónica has announced it is working with IBM in a blockchain-based and cloud-based project to improve the routing of international calls. The company wants to track in real time each international call, including origin, destination and duration, and make that information available to all the operators carrying the call.
Gonzalo Martín-Villa, chief innovation officer of Telefónica, said in November: “Blockchain will allow operators to generate a new layer of confidence in the internet – based not on the players that generate the data and the transactions but on the data itself.”
The company will use IBM’s own blockchain platform running in IBM’s cloud to improve “the reliability and transparency of information collected by different networks when routing international call”.
Martín-Villa added: “This project is one of our first initiatives to secure real benefits from the adoption of blockchain in our core business.”
Never break the chain
Back at Capacity Europe, Telstra’s Sullivan agreed that blockchain is needed in the voice business. “It is a high-volume, low-margin, cash-flow business – and therefore you need fast cash flow,” he said. He wanted more applications of blockchain. “We need to accelerate the proof of concept and develop it further,” he said, suggesting the industry could try the technology for areas such as internet of things.
PCCW Global’s Halbfinger asked: “What is the right structure that the industry needs to deliver the technology? How can this allow us a more dynamic settlement environment?”
Meanwhile there is already a relatively unsung company that is already using blockchain to help the industry. Internet Mobile Communications (IMC) has been around since 2012 and in August 2018 it registered a subsidiary as a financial institution in Malta, an EU member state. The Bank of Telecom (BoT) has its own blockchain-based currency, BoTCoin. “Our token is linked to the US dollar,” said CEO Mark Stewart. “One BoTCoin is worth $1, and we use it for international settlement.”
Money is moved in BoTCoins around the world in seconds “directly from company A to company B”, using blockchain technology. IMC charges a flat rate for “international settlements anywhere in the world” of just $10, “and we pay a monthly bonus with the account”, which Stewart likened to interest. Traditional banks take “three to five days to make the transaction”, he added.
IMC has “1,000 members from 120 countries”, he said. “All the members are trusted telecoms companies.” BoT “has the potential” to be the main route for moving money around the telecoms industry, said Stewart when I interviewed him in October at Capacity Europe. “We already have the customers. And we are regulated by the Malta Financial Services Authority.”
The Sphere, which is also a company made up of telecom industry veterans, also offers a blockchain-powered global ecosystem, backed by $6 million capital investment. Through a single interconnection, the Sphere enables carriers and operators to “remove commercial inefficancies and operational challenges” by tackling fraud.
The telecom industry is at a crossroads,” said Yariv Trabelsi, CTO of The Sphere. “It needs to evolve in order to stay relevant and turn a profit. Typical margins in the middle market used to run between 10% and 12%; now, they’re closer to three percent or less. Meanwhile, the retail side is struggling to handle the increasing amount and severity of fraud. As concerned telecom industry veterans, we decided to solve for these challenges by creating The Sphere, which is a seismic development for the market — and this is just the beginning.”
Just as I asked Haggiag why blockchain is needed, I also asked IMC’s Stewart the same question. “The beauty of our solution is you have a crypto key in your browser,” he replied. “The customer controls access to the account. The network can’t be hacked. We are pegged to the US dollar – the international currency for settlements. No hedging is required. It is a stable token.”
What are the challenges? Stewart also echoed people connected to the GLF-backed blockchain projects. “Market awareness was the initial challenge, but blockchain has become more familiar,” he said. Indeed, you’ll be reading more and more about it in telecoms.