Blockchain: overhyped or must-have?
27 April 2018 | Editorial
Will blockchain’s distributed ledger technology unlock new carrier operational dynamism and revenue opportunities? Sue Tabbitt reports
Open just about any publication at the moment and, if it’s not artificial intelligence, it’s blockchain dominating the headlines, heralded as the next big thing that’s going to change the way the world works. But will it – and what, specifically, might it mean for wholesale telcos?
Certainly it’s something carriers, in common with many other organisations, are looking into. On the one hand it promises to open up the possibility of managing transactions very differently; on the other, blockchain’s premise potentially opens up new service and revenue opportunities. But how much of what’s being promised is hype, where might the reality settle, and what are the more innovative options that blue-sky visionaries should keep a look-out for?
First, it’s worth setting out some definitions. Originally associated with bitcoin/cryptocurrency, blockchain technology provides a distributed ledger mechanism that enables secure trans-actions – not just financial ones – to be agreed and processed along a supply chain, or across an ecosystem, without the need to pass through an official central settlement hub.
Distributed ledgers use independent computer nodes to capture, share and synchronise transactions in their respective electronic ledgers, removing the need for a single, centralised ledger or data store. The idea of managing payment settlements or other transactions such as contractual agreements this way means that it’s potentially faster, more efficient and dynamic – allowing more real-time stuff to happen and paving the way for transactions to be highly individualised.
Transactions could be for the tiniest amounts too, because there isn’t a minimum charge for processing them, which means the proposition ought to lend itself well to real-time service personalisation and more granular billing.
The potential interest to telcos is substantial. Blockchains rely entirely on networks to exist, because that’s where everything happens. Secondly, seamless telco network-based services involve complex handovers, agreements and financial settlements between service providers as traffic is carried between destinations. As that traffic becomes richer, more diverse in nature and more sensitive to service quality, the measures and controls around what happens to it and their timeliness become more critical.
Additionally, telco services are becoming increasingly virtualised and cloud-based, placing greater emphasis on clever, software-based automation of service management and monitoring and discrete, real-time billing.
Finally, the potential for blockchain-based operational improvements and value-added service innovation has attracted the attention of enterprise customers, which are now looking for suitable technology and service partners to help them harness the opportunities and guide them through any risks.
So, looked at from just about any direction, blockchain or the broader category of distributed ledger technology, of which blockchain is just one variant, deserves board-level attention from telco carriers.
For Ravi Kumar Palepu, VP and global head of telco solutions at IT consultancy Virtusa, the possibilities are exciting for carriers, with operational potential spanning contract management, capacity planning, identity management, root cause analysis, network, device and infrastructure management, quality of service and performance management.
Immediate opportunities include simplifying and providing greater visibility in inter-carrier relationships. Here, blockchains offer greater visibility of what’s going on across a service ecosystem, he says – not only offering new options for billing management, but also leaving individual parties with no place to hide if something goes wrong for customers.
“Blockchain is particularly useful in contexts where there is a need to manage multiple partners, so it is a perfect fit for inter-carrier contract management and dispute resolution as it provides transparency between customers, the carrier, their partners and suppliers,” Palepu explains.
One of the challenges for wholesale carriers is that they do not own the entire customer journey, he notes. Where there is an agreement to provide services to a global bank, for instance, the lead carrier is likely to rely on other service providers in at least some countries – a complex scenario to manage, involving multiple agreements and SLAs. In the event of a customer complaint, the wholesale carrier must first confirm whether any service issues have occurred, if these breach SLAs, and which partner is responsible.
“Traditionally, the carrier would rely on third-party data feeds to build up this picture,” Palepu notes. “But this can be very time-consuming and often incomplete, leading to inter-carrier disputes and irate customers. A breach of SLA can cost the carrier hundreds of millions of pounds, so this information black hole is a huge business risk.”
Blockchain brings transparency to the customer-carrier-partner-supplier ecosystem by enabling all parties to contribute and share information, Palepu explains.
“Whether it’s a network engagement, or billing or operational support, each partner, supplier and customer involved in that customer engagement can feed their respective information into the blockchain.”
He adds: “As blockchain is a trans-parent distributed leger, each party can update their thread in real-time with agreed information and only have to worry about their piece of the puzzle. The carrier can then pull together all this data and apply analytics to derive meaningful insights.”
One obvious result is an end to buck-passing, boosting customer service. “Everything is right there in plain sight,” Palepu says. “This visibility also enables carriers to identify and fix problems more quickly, so they are more likely to stay within the terms of their SLA. This ultimately would help telco wholesalers to offer better service and connectivity than ever before.”
Having greater clarity and the ability to resolve inter-party dealings more efficiently and accurately also offers telcos a chance to manage their operations in a more streamlined and dynamic way.
Phill Lawson-Shanks, chief innovation officer at EdgeConneX, a specialist infrastructure provider which helps deliver a better content experience for end users, says: “Very soon, International Telecoms Week will take place in Chicago – an event that historically saw representatives of US telco organisations turn up with boxes of computer printouts: logs of all of the call minutes they’d handled and details of who owed each other what. With blockchain, all of this can be reconciled instantaneously.”
On the brink
If he is reserved in his enthusiasm it is only because of the work that needs to be done so that telcos can exploit the potential of blockchain technology. “We’re on the brink of something really exciting, but there is a lot to sort out first,” he says. “Certainly blockchain is a key enabler, but a lot of things need to be lined up for everything to fall into place.
Lawson-Shanks believes that early movement towards blockchain-style mechanisms is happening in pockets – as part of the move away from expensive, monolithic, proprietary back-office systems, and as telcos strive for an end-to-end view of customers, and a more dynamic approach to billing. Blockchain could certainly help with this, “but it will be a while,” he says.
Virtusa’s Palepu agrees. “Blockchain is a foundational technology; it’s not something you can quickly switch in,” he says. “Carriers have incredibly complex network infrastructures, so making a change like this takes time and planning. There are a number of considerations that need to be taken into account – such as scalability, security and costs – before a service provider can take the leap. So, while blockchain use is tried and tested in banking and insurance, carriers are rightly cautious about taking the plunge and have not adopted the technology fully at this stage. However, we are seeing more and more proofs-of-concept taking place, so I expect this to start to change as theory moves into reality.”
One such proof-of-concept, by PCCW Global, the international operating division of Hong Kong-based telecom giant HKT, and UK telecoms/data centre company Colt Technology Services, in collaboration with Clear, a blockchain start-up company, has shown that it is possible to reduce inter-carrier settlement time from hundreds of man-hours per month to less than a minute using blockchain technology.
But it’s important not to get too carried away, as there are issues and challenges that need to be overcome before telcos can start reaping the many potential benefits of blockchain/distributed ledger-based opportunities.
One of the concerns around blockchains is security, especially given that telcos are custodians of vast quantities of sensitive personal data about customers and their activities. With the new General Data Protection Regulation coming into play in EU countries from May, wholesalers will not want to gamble their reputations if there is any doubt about information falling into the wrong hands or straying beyond EU borders. Although blockchains are supposed to be inherently secure, in a cryptocurrency context there have been high-profile breaches.
Lawson-Shanks thinks telcos will create their own distributed ledgers within their own firewalls, to minimise their exposure. “They’ll do everything within their own walled garden to fulfil the requirements of governing bodies around data handling and ensure everything is traceable and auditable,” he says.
Yet, carriers will need to be more inclusive than not if they want to maximise the commercial potential blockchain enables – so there is a balance to be struck between security and openness.
Ed Finegold, director of content strategy at Netcracker Technology, a specialist in OSS/BSS and network virtualisation, says: “One of the core tenets for blockchains is that they are meant to safely facilitate trading partner relationships in environments where many of the parties don’t necessarily know or trust one another. So, because the wholesale side of the business is growing and changing to create more partner-driven services and mash-ups, it could make sense for service providers to organise around the idea that all trading partners in a partner ecosystem join and belong to your blockchain.”
Reservations and challenges aside, EdgeConneX’s Lawson-Shanks speculates that, in five years, the industry could look back with amazement that anyone questioned blockchain’s potential. “We can’t be sure when, but it will become commonplace,” he says.
Beyond operational and customer service advantages, Lawson-Shanks envisages blockchain/distributed ledger facilities helping carriers to exploit and manage rich media content opportunities. “A lot of the traffic being passed across networks is video and other rich media, from Facebook, YouTube, Netflix and the like, and it’s no coincidence that telcos are buying content companies to get access to their catalogues,” he says. “But telcos need to know who’s using what and when, and blockchain is the perfect tool to monitor that.
“Once 5G is a reality and we have ubiquity of connectivity, everyone will be a broadcaster. If you’re the carrier of that content, you’ll have an interesting degree of responsibility – especially in the wake of the recent Facebook scandal over data sharing. So carriers will need good insight into what’s being said, what’s being moved and looked at where.” Of potential additional revenue opportunities, Lawson-Shanks sees blockchain paving the way for telcos to act as the conduit and customer owner for all sorts of innovative microservices, such as mobile phone-based banking and micropayments in markets such as Africa, or validating access to secure patient medical records.
“And that’s before you even get into IoT opportunities such as smart homes and connected cars,” he says. “For all of these emerging applications, there’s a huge monitoring and measuring requirement. Using blockchain, carriers can distance themselves from the race to the bottom on pricing for voice minutes or data plans. This is a chance to rise above the crowd and offer something unique.”
Netcracker’s Finegold picks up on the potential for blockchain in digital identity management. “If being a trusted digital identity broker is still something service providers would like to achieve, applying blockchain could make great sense because it can create the concept of ownership of one’s digital identity in a way that is lacking in the market now.”
Joanne Frears, a solicitor at law firm Lionshead and an advisor on the legal aspects of blockchain, agrees that digital identity management is one of many lateral routes large operators could take with the technology if they have vision. “As early adopters and rapid accelerators of technology, customers already trust telcos to provide safe access to systems,” she says. “There is scope to provide better transparency and is it an easy step for telcos to add blockchain’s self-certification of accuracy to their service offering.”
Ridiculous use cases
But John Wilmes, director of IoE projects at TM Forum, warns against thinking that distributed ledger technologies including blockchain offers an automatic passport to future fortune.
“Distributed ledger technology (DLT) is not a panacea,” he says. “It currently suffers from the ‘hammer problem’ – that is: ‘I have a hammer and everything looks like a nail’. If we step back and take the perspective that DLT is a database that may be slow or otherwise inefficient, but can be trusted by parties that need not trust each other, it helps to filter out some of the often ridiculous use cases being proposed.”
He adds: “When looking at the revenue opportunity, it makes sense to ‘follow the patents’. This is a fairly good indicator of intent, whether the patent is being used as a sword or a shield. BT filed at least six DLT patents in 2017. Other recent telco patents include Verizon (digital rights management), Telefónica (data tracking through service function chain), and others from Comcast, Du, Orange, Swisscom, Huawei, IBM and Microsoft. With the caveat I’ve already outlined, any use case involving trusted multi-party decentralisation is a candidate.”
Getting telcos themselves to speak openly about their plans is another matter, which may be a measure of the competitive value they see attached to the opportunity – or evidence that most are still unsure of which route to take at this point.
Orange International Carriers was among the carriers that actively declined to speak on the subject at this stage; others politely ignored our requests for comment.
Activity is clearly underway though, with new members signing up to a global blockchain consortium, the Carrier Blockchain Study Group, whose stated aim is to explore how to collaborate on building a global next-generation cross-carrier blockchain platform and ecosystem. South Korea-based carriers LG Uplus and KT, along with Etisalat, Telefónica and PLDT from the Philippines joined existing collaborators SoftBank, Sprint, Far EasTone and TBCASoft.
In the meantime, legal advisor Shears thinks the need to build confidence in services will restrict how ambitious telcos can be – at least initially. “Privacy by design seems to conflict with blockchain transparency but they are in fact two ends of the same spectrum,” she notes. “People want to trust what they see and what they receive. How to mitigate these is a whole other issue.”
So, what level of movement can be expected for the rest of 2018 towards blockchain projects?
“Many are predicting that 2018 is the year we will start to see ‘productisation’ of blockchain, and it seems likely this will happen,” says Frears. “With that in mind, within the next 12-15 months we will start hearing announcements of telco blockchain projects and receive invitations to participate in these services. My best guess will be hardware and billing as small-scale springboard projects, followed by wider offerings to other businesses.”