Growing impact and future potential of blockchain for telcos: A Game Changer?

José Luis Núñez Díaz    18 November, 2021
Blockchain Telcos

Could blockchain really impact on the business of communications providers? As an industry, have telcos already embraced this technology? Do they see any opportunity behind blockchain? Do blockchain and decentralized technologies make sense for telco industry? If you search for telco blockchain in Google, you have a lot of results, but most of them are posts listing uses cases in the telco businesses identified by consultancy firms and analyst as relevant for applying blockchain. Repeatedly we find use cases for roaming and intercarrier settlements, fraud detection, IoT identity and security, 5G provisioning and so on. However, they are not identified by the telco companies themselves.

In fact, if we exclude the banks and the financial industry in general or some big players in the world of logistics and distribution (such as Maersk or Walmart), telcos and industry consortium like GSMA or GLF have been one of the most active companies and institutions in exploring the possibilities of this technology. However, very few, if any, projects have gone beyond proofs of concept or narrowly scoped implementations.

Relevance of telcos in adopting blockchian

One way to measure the relevance of telco industry in adopting blockchain can be to look at the Blockchain50 list published by the renowned Forbes magazine. Each year, this list recognises the 50 biggest companies in the world that are using blockchain tech. Last list, published early this year only includes two telcos: Swisscom and Telefónica. So, why being so active telcos don’t have more presence here? Despite the fact that financial institutions and companies holding or handling cryptocurrencies are over-represented, we can explain that because projects pushed by telcos have no significant impact on their core operations yet.

In fact, Swisscom merits for entering the list are related with crypto projects and digital assets. In our case, Telefónica is part of the list because of the massive adoption of blockchain in supply chain management and TrustOS, the sw suite for easily building consortiumless but decentralized enterprise blockchain applications.

Revisiting the Blockchain Magic Quadrant

Can we measure or advance in anyway the impact of blockchain projects in the telco businesses? Almost 3 years ago we presented a tool which allowed us to analyse in a very simple way how and when the different blockchain projects and initiatives we were considering at the time would impact the organisation. We call this framework The Blockchain Magic Quadrant. The quadrant was just a conceptual exercise but simplified how we can compare completely different projects to allocate resources and manage the expectations about the technology.

The Blockchain Magic Quadrant

We reviewed any project from different perspectives, but at the end each one had a main business driver: it activated savings, generated incomes or created new markets. There is also a lot of projects using Blockchain just as a technological enabler. They don’t have any special impact in the business. They creates value because of the solution itself, not for using blockchain. For the rest of projects, the Quadrant allows us to group initiatives in three big families depending on the nature of their impact in the business. So, we divide the quadrant in 3 sectors: IMPROVE, TRANSFORM and DISRUPT.

The IMPROVE sector in the quadrant

It is the base of the quadrant and we find a first group of projects that take advantage of the adoption of decentralized ledgers in pre-existing business processes. These initiatives IMPROVE the companies current businesses, creating efficiencies and savings for the existing products and services that justify the migration of traditional approaches to new solutions based on decentralized architectures and blockchain technologies. They make the same things they had been doing and in the same way, but better because of adopting blockchain. These efficiencies come mainly from reducing the operating time of control processes and operational costs due to non-conformities or disputes resolution in complex and multiparty information exchange processes.

Besides, cumbersome verification and auditing processes are also simplified, even making the requirement of a trusted neutral third party unnecessary, as the technology itself notarises the information and turns it into immutable and irrefutable by the parties. Blockchain becomes in many cases the excuse for the digitalization of the process. The complexity of these projects lies in their integration with legacy systems. The paradigmatic example of this family of projects is the application of Blockchain in the supply chains. These projects are not telco specific. If we focus on the telco industry, the IMPROVE projects deals with settlement betweens carriers and operators.

The Magic Blockchain Quadrant: IMPROVE sector

Supply chain management

There are a lot of productive projects acting on this field and improving the way in which commercial relationships between companies are faced. Telcos usually are very big companies with global supply chains and intercontinental logistics that involves a very complex network of participants. So, blockchain is a powerful tool for telcos to optimize their operations by applying it to face the supply chain challenges. Will the supply chain impact enough in the telco business? Well, obviously it can help in reducing costs and so, increasing profit but the business remain the same. Remember the statement for this sector. We do the same things, in the same way but a little better.

Intercarrier settlement

The other big case to apply blockchain in existing processes is the settlement of data and payments between different companies. These means for telcos the roaming and wholesale business. While supply chain projects are a reality, in this case, we find a lot of multilateral proof-of-concepts sponsored by existing consortia like GSMA or GLF. They are even trying to standardize how the networks should evolve to a decentralized paradigm. In some successful cases, the projects have even been deployed between some operators to improve their bilateral relationships. In any case, impact in business is still not very significant.

The TRANSFORM sector

The second sector groups those initiatives that TRANSFORM businesses. In contrast with supply chain or settlement cases, they take advantage of Blockchain to propose new ways of doing the same things. They are projects enabling trusted ecosystems where new entrants can play a role that contributes with extra value to the products and services: they are transforming the value chain to provide them, both enabling new business models or creating new sources of revenues in the existing markets.

Examples of these TRANSFORM projects are the Self Sovereign Identity concept or those projects that we call platform uberisation initiatives.

The Blockchain Magic Quadrant: TRANSFORM sector

Decentralized management of Digital Identity

This concepts implies that the user is the key player and central entities that verify identities become unnecessary. Companies can issue verifiable credentials that proof some attributes of your identity that anyone can verify without asking the issuer to validate them. This new scheme for authentication and authorization services completely transform the digital identity field. The new players in this game will be those companies having a deep knowledge about their customers that will develop a new source of revenues.

And usually telcos know a lot about their subscribers. They know who they are, how and when they move or their history of payments for their subscription. All of them are attributes easily issuable as verifiable credentials that can add value to third parties business models. Besides, telcos can easily and trustworthily deploy a wallet in subscriber’s handsets to make easier to them managing their credentials. So, if self sovereign identity ecosystems exploit in the near future, telcos are in a very good position to capture part of the value. Digital Identity services already exists, they are the same things, but thanks to blockchain and decentralization, new players will enter the ecosystems to do them in new ways.

Platforms uberisation

Another trend enabled by decentralization and blockchain technologies that could seriously impact in telcos and digital services providers is what we can call the uberisation of networks using the cryptoeconomy. Platform economy isn’t new, however, blockchain adds to platforms the power of decentralization and total transparency to the economical incentives that engage users to contribute to the ecosystems. There are a lot of projects where users rent out their assets in exchange for crypto-based tokens. They works when new participants become computing providers, storage providers or connectivity providers.

Beyond peer to peer networks for storage or computing, especially disruptive is the proposal of startups like Helium, called itself the people’s network. Its aim is to build a wireless network deployed by normal people connecting a simple device to the Internet in their home or office. This device acts as a hotspot providing low-power network coverage (LoRa) for billions of IoT devices. Users become connectivity providers and can quickly recover the investment in the device by earning cryptocurrency because of the coverage it is providing.

Today, Helium network has almost three hundred thousand hotspots, adding seventy thousands new ones the last month. Thanks to blockchain-based incentive model they are deploying the largest decentralized wireless network in the world. Decentralization ensures network robustness, although availability and network service can’t be committed in the same terms that traditionally deployed and operated telco networks do. Today, the LoRa coverage can’t compete with operators’ 5G network. However, Helium plans including also the deployment of 5G hotspots in the near future. This will change completely the way in which telco operators traditionally deploy and operate radio networks. Anyway, these models show us that again, things can be done in new ways and new entrants can transform the existing markets.

The DISRUPT sector: tokenising everything

We have the more aspirational projects in the DISRUPT sector. Disruption comes for its ability to create and open NEW MARKETS, either generating new assets that did not exist before or creating secondary markets from the inefficiencies or inelasticities of the previous scenarios. We have no idea about what new markets enabled by blockchain disruptors are imagining right now, but in my opinion, many of them will be related with tokenization.

Currently, the king of the trends based on tokenization is the NFTmania. We can spend very long time reviewing what things are people monetizing by creating Non Fungible Tokens. I’m not going to question what can be or can not be a token. They are everywhere right now. Brands are issuing NFT collections for raising funds from their fans. Other guys are creating Kitties, Zombies or even Digital Art that can be commercialized in the NFT markets.  

And the most nerd trend enabled by blockchain is the metaverse. Even Mark Zuckenberg announced some weeks ago his plans. He thinks that the future of Facebook is in the metaverses, those virtual worlds populated by avatars. They can be implemented without blockchain, but blockchain enables the possibility to close economical transactions in a trustworthy way. If banks were the first companies to explore cryptocurrencies, gaming companies are the first making business not exactly in the metaverse, but with the metaverse. They are actively selling wearables for the avatars in the same way the placed them in the videogames. And the best way they found to ensure the buyers that they are buying an authentical complement for their avatars is blockchain, or more precisely, issuing NFTs.

The role for telcos

Can play telcos any role in the metaverse? Will the communication between avatars in the metaverse a service that the telcos can provide? We don’t know, but new digital services like metaverses only can exists in a hyperconnected world, with ubiquitous low-latency networks that allows to interact with the avatars in real time from everywhere. In addition to this, the network becomes relevant as the only “centralized” element that can anchor the decentralized world. The communication network can notarize everything travelling through it, becoming the only trustworthy and shared element that connects people and companies. This notarization, in terms of collecting evidences of executed transactions could be also one of the roles that telcos could play in the next years.

The Blockchain Magic Quadrant; The DISRUPT sector

FORECASTING

Summarizing, we introduced the Magic Quadrant framework to asses the eventual impact of blockchain in organizations, positioning the projects we mentioned in three waves depending on the timeframe we think they will be in production. But I have intentionally not tried to give estimates of market size, opportunities or revenues.

According to IBM, the impact of lack of supply chain visibility are around $300 billion globally. Just by improving efficiency by a few percentage points we have a billion dollar business. The disputes in global roaming market reach several billion dollars yearly. Juniper Research found that the SSI (self-sovereign identity) movement will reach annual revenue of $1.1 billion by 2024. Market cap of Filecoin and Helium reach $12 billion. Decentraland, one of the popular metaverse, values $5 billion and all-time sales of NFTs will reach $10 billions next week. All these flourishing businesses needs reliable blockchain networks to operate and telcos know how to do that. So, just capturing some of the value we are facing a market worth billions.

Value for telcos

So, is blockchain a game changer for telcos? It may not be as disruptive and transformative as promised, but it will be an endless source of opportunities. Some reports suggest that Blockchain Market worth $67.4 billion by 2026. We can look forward to a few months from now to see if telcos are indeed playing a role in the new markets that have been created around metaverses and NFT containers and tokenisation projects.

But in the meantime, we cannot ignore the opportunity to provide reliable blockchain infrastructures that allow all these opportunities to develop. By capturing just two percent of this market, we are already looking at a billion dollar opportunity and beyond the big cloud providers, what other companies can provide this infrastructure? I believe telcos can and should develop it. We are in the best position to help companies in adopting blockchain and provide them with reliable infrastructures and easy-to-use services to develop their disruptive business models.

Footprint

This content was part of my keynote at Telecoms World Asia conference run virtually in November 2021. You can find the presentation I used at https://www.slideshare.net/jota.ele.ene/growing-impact-and-future-potential-of-blockchain-for-telcos-a-game-changer

This article has been published by José Luis Núñez Díaz on 18 November 2021 in Think Big blog has been registered in blockchain via TrustOS with the following identifier: did:vtn:c1:certid:ebb6ad47f2d4b70c6ef62a8b32c2c43def9abdb16e7fd9c82bbefbbdb7bb6da3. You can verify it by clicking on this link.

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