Blockchain in Telecom – Hype or Reality

Published on 29 Nov, 2018

The telecom industry has been in a state of flux as it looks to optimize operations and generate additional revenue streams. It is keen on tapping the benefits of blockchain technology. Blockchain essentially facilitates faster transaction processing and decentralized operations, thereby addressing various problems faced currently by telecom operators.

Dynamics in the telecom industry have been changing with the growing prominence of value added services such as over the top media services, location-based services, micro payment, etc., along with decreasing revenue from traditional voice and data services, and high bandwidth demand. The industry needs to find additional sources of revenue and reduce operating costs. This is prompting communication service providers (CSPs) to consider blockchain technology.

Potential benefits of blockchain makes it an attractive proposition for CSPs

Blockchain can impact the core management operations/internal processes of telecom operators, such as operations support system/business support system (OSS/BSS), including billing and rating systems, fraud detection systems, etc., enabling them to streamline processes, increase efficiency and (consequently) reduce costs. It could also affect their topline by facilitating the creation of new digital services such as Identity-as-a-Service and data management services, thereby generating new revenue streams. Moreover, the technology could impact telecom companies providing connectivity services for IoT environments where connected devices can operate in self-managed networks, facilitating low-cost set-ups and reduction in security costs.

Use cases of blockchain implementation by CSPs:

Scalability and other issues may hinder the outright adoption of blockchain

As with any new technology, issues associated with blockchain may come in the way of its adoption industrywide. One of the primary concerns is scalability. Storing historical data at blockchain nodes may prove problematic, considering the high volumes of call data that need to be stored (at each node). If the system becomes too large, transaction speeds would reduce as each node would participate in transaction verification, leading to time lag. This would contradict the speed-related advantage mentioned under fraud detection and 5G enablement implementations. Also, the inherent operating logic of blockchains may increase operational costs. As each node in the network would essentially perform the same function on its own block, computing power would be needed at each node for the same task. Moreover, as the network grows in size, transaction costs would increase significantly, negating cost benefits at scale.

Scalability issues could severely hinder the implementation of blockchain for IoT devices, as a vast number of connected devices would constitute the blockchain network. Moreover, the connected devices acting as nodes may not have significant computational powers for encrypting and verification of transactions. This would necessitate an overhaul of existing devices.

Although blockchains are considered inherently secure given their use of private and public cryptographic keys, the safety of the systems depends on users. If users are lax and store private keys on unsecured platforms and cybercriminals happen to get hold of these using traditional scams, then they could access all services paid for by the user. Additionally, it would be difficult to track criminal activities and weed them out from the system in the absence of a centralized control mechanism.

Blockchain networks are complex, requiring complex governing protocols. As the size of the networks increases, it would require numerous personnel to understand the networks to keep them running optimally. Thus, the management of blockchain networks, once scaled, could prove to be a daunting task.

Road ahead

With research on possible use cases of blockchain in the telecom sector and creation of ecosystems needed for implementation underway, we expect the technology to gain traction in the telecommunication sector gradually.

Although several concerns need to be addressed, such as security and privacy of personal data and compliance-related issues in the absence of a clear governing framework and structure, the potential benefits of blockchain technology stand out. With research and experimentation on possible solutions to scalability issues of blockchain, such as sharding, off-chain transactions, limiting the size of the blockchain networks, and archiving older data, widespread adoption of may not be that far.

Telecom companies are collaborating in this regard. For example, the Carrier Blockchain Study Group (CBSG) has been created, as a joint effort to develop a blockchain platform for telecom operators. The CBSG comprises of telecom companies such as Taiwan-based Far EasTone Telecommunications, US-based Sprint Corporation, Japan-based SoftBank, South Korea-based LG Uplus, UAE-based Etisalat Telecommunication Corporation and KT Corporation, South Asian operator Axiata Group Berhad, etc. 

The collaborative efforts of the telecom operators and well as expected/possible standards and governance from authorities would help the creation of ecosystems needed for widespread adoption of this technology and accelerate its understanding and progress in the telecom space