The Penetration of Blockchain and Cryptocurrencies in the Telco Industry

Cryptocurrencies and blockchain technologies have experienced a resurgence in popularity over the recent months. Digital currencies such as Bitcoin, Ethereum, and Litecoin have garnered increasing acceptance as payment modalities from notable online payment platforms (e.g., PayPal, Venmo, Visa) and established businesses across diverse industries (such as Tesla, WeWork, and TIME magazine, just to name a few). Cryptocurrencies’ potential as a store of value and investment vehicle has not only piqued the interest of retail investors but also well-established financial institutions such as DBS, Goldman Sachs, and Morgan Stanley. Consequently, the reinvigorated interest in cryptocurrencies has thrust the spotlight on the disruptive possibilities of blockchain technology and its applications beyond the transference of value from point A to B.

The secure, decentralized nature of blockchain technology can enhance the operational efficiencies of various industries that include real estate, health care, and supply chain management. It is therefore not a surprise that forward-looking telecommunications companies have shifted their attitudes towards this technology and have taken measured steps in exploring the possibilities of blockchain. Two noteworthy Mobile Network Operators (MNOs), Deutsche Telekom and Etisalat, have recently engaged in partnerships with companies in the blockchain technology space:

• Deutsche Telekom has invested in blockchain payments platform Celo. It has also acquired an unspecified amount of Celo’s native digital tokens (CELO) that are used on the platform. This is a notable milestone for Celo because Deutsche Telekom will be the first telecommunications company to join its 130-member strong, global Celo Alliance for Prosperity. Celo is an open source blockchain ecosystem that aims to make financial systems and tools accessible to anyone with a smartphone. As part of the deal, Deutsche Telekom—through its subsidiary consulting firm T-Systems Multimedia Solutions (MMS)—will operate as a validator and secure the Celo infrastructure through its Open Telekom Cloud (OTC). Deutsche Telekom has also initiated a German Blockchain Ecosystem (GBE) that enables users to enable different applications using blockchain.
• Etisalat Digital has collaborated with the Central Bank of UAE, Avanza Innovations, and seven other banks to launch UAE Trade Connect (UTC). UTC is a platform that leverages blockchain, Artificial Intelligence (AI), Machine Learning (ML), Optical Character Recognition (OCR), and robotic process automation to detect and prevent instances of erroneous/fraudulent invoices. Earlier this year, Etisalat also integrated blockchain technology into its HR processes. Etisalat will provide employee HR letters based on blockchain credentials, ensuring the legitimacy and security of the content of documents such as proof of employment or pay slips.

Blockchain’s bolstered security, transparency, and facilitation of trustless transactions through its immutable Distributed Ledger Technology (DLT) can greatly benefit the core operations of an MNO. For example, blockchain technologies can be instrumental in supporting MNO-specific activities such as sharing of infrastructure resources and international roaming.

The complexities of accurate tracking and management of resources in mobile network infrastructure sharing arrangements can be alleviated through the use of blockchain-powered smart contracts. Smart contracts are customized codes that can be integrated within the blockchain to execute the mutually agreed up conditions of a contract agreement. Smart contract-governed infrastructure sharing arrangements can extend to both (a) active infrastructure sharing, in which MNOs would share active network elements such as basestations, antennas, and core network, and (b) passive infrastructure sharing, in which MNOs share physical infrastructure such as power, cooling, and backhaul transport networks to reduce CAPEX and OPEX. These arrangements—especially in active infrastructure sharing—require cooperation, trust, and tight integration between two external parties. In these instances, smart contracts can function as the objective arbiter in tracking the usage of resources in a network infrastructure sharing agreement. Payment disbursements and other associated stipulations can be automatically enforced without the need for any intermediaries.

The multi-stakeholder process that is inherent in international roaming is another opportunity for blockchain technologies to upgrade. International roaming is usually a convoluted process that involves one or more intermediaries to resolve payment based on international network usages. The “middlemen” that facilitate international roaming between local and foreign MNOs are intermediate operator billing centers that provide bill settlements between MNOs that have signed roaming agreements. As with many use cases that use blockchain, the intermediaries required in an international roaming will no longer be required. International roaming agreements between local and foreign networks governed by smart contracts could potentially eliminate the risks, operational friction, and costs of conventional international roaming arrangements. Aside from enabling accurate billing information through blockchain-based recording of international calls and data roaming consumption, smart contracts can also execute automatic inter-MNO payments through dispersal of cryptocurrencies amongst the involved parties. The utilization of cryptocurrencies in these arrangements can also bypass the costly and time-consuming remittance process of financial intermediaries as well.

The potential for blockchain to enhance the operational efficiencies and service deliveries of modern networks extend beyond the aforementioned examples. Blockchain technologies can also streamline an MNO’s supply chain processes by having full visibility and traceability across all stages of the supply chain. Vendor qualification can also be ameliorated through the transparency and improved credibility of shared data. The Vodafone Procurement Company (VPC), for example, has leveraged IBM’s vendor validation platform for supplier discovery, qualification, on-boarding, and life cycle information management. The value of blockchain applications in a network also extends to 5G use cases such as access technology management in 5G networks or managing secure peer-to-peer connectivity in massive Machine Type Communications (mMTC) scenarios.

That being said, another interesting application of blockchain technologies that can augment an MNO’s core operations can be circled back to where blockchain attained its claim to fame—cryptocurrencies. As mentioned earlier, cryptocurrencies bypass the costly and time-consuming remittance process of traditional financial intermediaries. There have been several blockchain startups that aim to add value to the telecommunications industry through the utilization of cryptocurrencies. For instance, a promising startup called Telcoin can position MNOs to provide money transfer services for their customers. Mobile subscribers will be able to buy, sell, or send Telcoin’s native tokens (called TEL) through their MNO. Another example would be Ammbr, a startup that enables its users to connect to a wireless mesh network for Internet sharing through blockchain. Ammbr users can also autonomously buy and sell Internet bandwidth amongst each other through the company’s native tokens (called AMR).

Telecommunications-based cryptocurrency/blockchain use cases, despite exhibiting tremendous potential, are still in their nascent stages. Obstacles such as regulatory considerations and the technological complexity of blockchain integration within a network’s operational/billing software would have to be overcome for these use cases to be fully realized. Nevertheless, these emerging technologies are well-positioned to help MNOs address long-standing industry pain points, reduce operational costs, and provide more value-added services to their customers.