What is blockchain?
Blockchain is a distributed ledger which records digital transactions or data. This is securely held in multiple locations and is updated instantly. Picture a spreadsheet that is duplicated thousands of times across a network of computers. Then imagine that this network is designed to secure the spreadsheet, as well as regularly update it, and you have a basic understanding of blockchain.
Benefits of blockchain
Blockchain is a widely discussed technology which has the potential to greatly impact all industries – not least the telecommunications industry. The benefits of trust and transparency, the incorruptible data and its fail safe nature means that a blockchain network provides the constant availability of fully up-to-date information. This could enable better tracking of customers’ activity and better provisioning of services for the customer.
Trust and transparency are an important element of the blockchain. As data is embedded within a widely distributed network, by design, blockchains are inherently resistant to data modification. Once committed, data can’t be amended without using massive computing power and leaving a traceable digital footprint. Because data is embedded in the network it remains accessible to all, keeping everyone involved aware of every digital transaction.
This means trust isn’t established externally by a central authority or an auditor, but continuously, within the network.
Impact on the telecommunications industry
Mobile telecoms operators may see the greatest impact of blockchain in their core management systems and in adjacent services. Over the past two decades, disruptive technologies such as those by Over The Top (OTT) suppliers have been introduced, and some telecoms operators have seen decreasing revenues and increasing operating costs as a result. There is also continual transformation in the industry as it moves towards the wide adoption of 5G and IoT.
The results of blockchain adoption could be cost reduction (through process efficiency gains) and revenue growth (through new value propositions), as explored in this paper.
Fraud Management and Prevention
With an estimated annual loss to the industry of $38 billion, fraud management and prevention are understandably important topics for telecoms operators, especially in the areas of roaming fraud and identity management.
Blockchain has the potential to reduce industry losses due to roaming fraud, and to minimise costs for fraud detection applications.
Often, after roaming call data has been collected, there can be days to wait before being able to access data call records from an overseas telecom service provider. It is this ‘window of opportunity’ that organised crime can exploit when attempting roaming fraud.
Such roaming fraud can be overcome by automatic triggering of a roaming smart contract which enables instant charging. As long as a pair of operators have a roaming agreement, every time a subscriber triggers an event in a visiting network, a smart contract and the terms of agreement are executed, enabling almost instantaneous charging. There would also be inherent cost savings by the elimination a of third party roaming clearing house.
Identity fraud and the eSim solution
A physical SIM card can easily be obtained by SIM cloning or email phishing to commit identity fraud using false identification. Losses for users can be compounded by unauthorised access to many services under a stolen identity.
A more secure route is offered by blockchain: an eSim – associated only with a single device – makes it difficult to steal, and helps to protect private information which is encrypted in a private ‘key’. A public key is used to identify the device, authorise it on the network and offer a unique identity, whilst keeping the private key information secret. This ensures that the services which are subscribed to can only be used by the subscriber, creating an identification process which is inherently much more secure.
The same blockchain approach can be used to provide ID to machines in a Machine to Machine environment, instead of having to embed physical SIMs.
Blockchain adoption could optimise ID management through instantaneous and automated processes based on smart contracts1, replacing the need for many username/password combinations and overcoming the challenge of personal data being shared with third parties.
Telecoms operators could then utilise the significant amount of subscriber data that they hold, by providing identity-as-a-service to partners and subsequently allowing for additional revenue generation.
Blockchain will enable telecoms operators to streamline the processes involved in 5G technology. To attain the 5G promise of universal access across diverse networks, telecoms operators will need to access the fastest and most appropriate access node in the network. The current system is fairly slow, with access rules being saved centrally in a client/server model, with the client being the device accessing the network, and the server being the Access Network Discovery and Selection function. There are inherent delays in the system and the rules can’t be amended effectively in real-time.
A smart contract could allow each network to participate in their own rules and agreements with other networks. Not only can these smart contracts be dynamically amended as required, they can allow for seamless rating and charging of all services across the network. An example might be that if an office WIFI system provides access to the 5G network to a device, the telecoms operators could easily allow a reduction in that month’s invoice for the accommodating office’s WIFI.
Additionally, when a device broadcasts its location, the access node which can best provide service to the device is called on to do so. With knowledge of which devices are in the vicinity, by being in the blockchain network, location-based services can also be enabled allowing local connection prices based on supply and demand.
Internet of Things Connectivity
As the Internet of Things (IoT) grows, the challenge and opportunity for telecoms operators is to manage millions of interactions between sensors and devices, whilst securing the sensitive information that is being transmitted and captured. When considering the number of smart home devices which now appear in our households as an example, the high level of personal data which could be exposed through a failure in an IoT system can be understood.
Data and network security is a costly and essential part of IoT connectivity. The failures in IoT security currently involve devices that verify, connect or spend improperly with other devices. For years, researchers have demonstrated the ability for hackers to compromise such devices in order to control implanted cardiac devices, disable cars remotely and bring websites to a grinding halt by launching huge Distributed Denial of Service (DDoS) attacks.
By placing barriers in front of attacks from hackers, blockchain offers an additional layer of security that is underpinned by some of the most robust encryption standards available. This enables secure and error free peer-to-peer connectivity for thousands of IoT devices with cost-efficient and self-managed networks.
Blockchain can serve as a tool to both log data in a form highly resistant to tampering, and to fight the introduction of malicious IoT devices (via inexpensive networked devices with little or no native security features) into our networks. By registering an IoT device on blockchain, other devices on the network will know with a high degree of confidence that a device is what it says it is.
Drawbacks of Blockchain Implementation
Blockchain is new, and as with all new technology, it will only be the early adopters who make use of it at first. Whilst these companies and individuals will pick up the technology and run with it, they’ll also be the ones stumbling on the inevitable obstacles which will occur. This is important because they’ll be paving the way for the more conservative companies who are naturally wary in adopting new and innovative solutions. There’s a case to be made for hanging back and letting the mistakes be made by others, whilst analysing the space and waiting for the best blockchain solutions to be tried and tested before embarking on a potentially costly investment in the area.
There are also potential privacy issues to be overcome. Blockchain is built with total transparency in mind, but this doesn’t automatically lend itself to individual privacy. With customer data security at the forefront of any large businesses thinking, telecoms companies must put huge amounts of thought into how their customer data will be secured within blockchain.
At the moment, the biggest users of blockchain are cryptocurrencies, and steps are firmly underway in cryptocurrency world to implement various approaches to privacy. Research is ongoing, but the theory needs to be optimised to be practical to use in the real world. Time will tell which of these approaches are successful and become practical to use.
Whilst the EU and USA have so far had a hands-off approach to regulating blockchain, other countries will come up with their own regulatory obstacles which may take some time to overcome. And even when governments try to take a slow reasonable approach to regulation, what would happen where a blockchain which is meeting today’s regulations falls foul in the future of newly introduced regulations? The whole idea of blockchains is that they’re immutable, so no one will be able to change or update the existing data to meet the new directives.
Looking to the future
We’ve seen that a broad variety of applications may be able to be delivered across the telecoms industry by blockchains, and that there is potential to invest in, develop and benefit from the implementation of blockchain based products. Whether or not there truly is an impact in the industry from blockchain will depend on how the use cases are adopted by telecoms operators.
The benefits appear plentiful: cost savings from a shared view of transactions which eliminates third parties; hugely increased security across the board; and smart contracts which can allow for near-instantaneous charging and rules application, which can facilitate wider adoption of 5G.
The challenges may come in the detail of how the blockchain will be implemented. Blockchain is being developed and implemented faster than the legal framework can be adapted, and any use of this new technology must ensure compliance with existing data protection and compliance laws from the outset.
Some telecoms operators are already investing in the development and implementation of blockchain-based products. Others are hanging back and seeing what hurdles the early adopters are able to leap before investing in the area. The next few years may well see more widespread use of blockchain by the telecommunications industry, with the possibility that blockchain use will become the norm.