Clear Delivers Concrete Blockchain Application for Telecom

Clear is one of the few concrete blockchain applications currently being tested in the telecommunications industry, according to a recent Delta Partners article (“Blockchain has massive potential for the telecom industry”).

Crystallizing the impact of blockchain
According to the authors, blockchain has the potential to have a huge impact on the telecom industry thanks to the industry’s large customer base and internal processes.

Blockchain technology can drive benefits across three main areas: Efficiency improvements; cost reduction; and fraud mitigation. See Exhibit 1.

Exhibit 1: Potential of Blockchain applications

Blockchain applications for Telecom

Blockchain applications for Telecom

Credit: Delta Partners

Efficiency improvements streamline multiparty transactions by automatizing and expediting the process while guaranteeing the accuracy of the settlements between parties (thus avoiding duplication of verification processes). The benefits can materialize in different forms depending on the type of industry and the type of interactions/transactions required. For industries with regular and low value interactions with their customer base, such as telecom, blockchain can verify and automate transactions, with increased transparency for the end customer. The higher the number of low value transactions, the greater the potential of blockchain. The higher the number of players, the higher the number of cross-transactions, hence whenever multiple parties are involved, blockchain plays at its best. For example, in a telecom inter-carrier settlement scenario with three players, blockchain with deliver 3X value vis-à-vis the two players only scenario.

The Cost reduction potential is linked to the capability to eliminate intermediaries and reduce labour intensive processes through automatization. This is higher in industries with complex and labour intensive internal processes, like banking. Middle men can be eliminated as verification of transactions is automated and guaranteed through blockchain. This applies to telecom international roaming transactions and resulting international voice settlement where blockchain can replace the expensive mediation of clearing houses.

Fraud mitigation is mostly associated to high delinquency ratio such as identity theft and similar fraud. The food industry can greatly benefit from blockchain by enabling trusted tracking of food life-cycle to ensure the integrity of the cold chain in transportation, helping reduce the high volume of fraud related to the sale of expired, contaminated or counterfeit food. Blockchain-addressable security related concerns are also related to long verification processes, as the longer the time, the more exposed the process is. International money transfers between banks is an area facing this problem and so too is roaming settlement between telecom players, which currently lose more than $38 billion annually in fraud costs, according to Deloitte.

Potential use cases for blockchain
The article goes on to outline potential use cases for blockchain.

Looking at the telecom industry, it’s clear blockchain can have a big impact, thanks to the industry’s large customer bases, complex internal processes, multiparty transactions, long value chains, and presence of intermediaries, as well as high incidence of roaming fraud and associated costs.

As indicated earlier, there are a variety of potential applications of blockchain in the telecom space, from voice settlement to mobile number portability.

To simplify these telecom use cases, we have structured them by the type of application — operational enablement, industry enablement and service innovation — and qualified the benefits that each use case can deliver across the efficiency improvement, cost reduction and fraud mitigation axis as shown in Exhibit 2.

Exhibit 2: Blockchain’s use cases in Telecom

Blockchain use cases in Telecom

Blockchain use cases in Telecom

Credit: Delta Partners

In operational enablement, we have seen potential applications in supply chain management. Automated smart contracts are leveraged to orchestrate telecom’s supply chain suppliers and automate functions such as inventory management and procurement. This application delivers cost reduction through elimination of several intermediaries, like agents, and improves efficiency because of fast and secure settlement process.

Industry enablement examples include roaming, voice settlement and mobile number portability. The latter uses decentralized ledger for data and routing access across operators. A single store of customer data is created in the ledger, which delivers cost savings as information storage is not duplicated among several ledgers and porting can be executed instantaneously, improving customer experience.

In service innovation, several uses are conceptualized. For example, an IoT device ID can be enhanced through a distributed ledger that automates and secures a device’s identification, authentication and P2P data exchange. The blockchain can make information exchange faster without intervention of third parties for data exchange and security. Other uses cases that are not exclusive to telecom operators, but could have a central role, include identity management by offering the chance to store personal information in decentralized identifiers. The individual can then decide which digital partners can access the personal information in the ledger. The individual can in this way regain ownership of their digital identities, while reducing the cost and bureaucracy of ID verification.

It is crucial to understand most of these applications are theoretical at this stage. To better understand reality versus theory, we have mapped the most discussed use cases in a Gartner hype cycle chart. As seen in Exhibit 3, most of these applications lie in the “innovation trigger” stage, where very early PoC, or just conceptualization, increased hype and expectations. Roaming and voice settlement are at upper edge of this phase, which is near the peak of inflated expectations. This is likely due to the first widely publicly disclosed PoC for intercarrier settlement of wholesale international services led by telecom operators such as PCCW, BT, Telefónica and Telstra in collaboration with startup Clear Blockchain Technologies. This is one of the few applications currently being tested in telecoms as others are still pure conceptualizations.

Real Use Case: Inter-carrier voice settlement
The article highlights Clear’s proof of concept with Colt Technology Services and PCCW Global. The PoC focused on inter-carrier voice settlement, where manual transactions and intervention by expensive labor still prevail. It demonstrated that intercarrier settlement times can be reduced from hours to minutes using their proprietary software running a smart contract.

The PoC was specifically focused on the settlement of wholesale voice minutes. This was first performed on the historical data and then in a live environment. When the daily settlement is executed, software automatically settles and pays all records/calls that are identical on the ledgers of the two operators. Discrepancies (normally ~5% of cases) are addressed in an automatic resolution algorithm. A private blockchain ensures that the software that executes the matching, settlement and resolution remains unmanipulated, while smart contracts are completed. Each operator owns a node (machine where the software is installed) and has visibility on the integrity of the whole blockchain. The security is further enhanced by each telco’s own IT security and firewall.

Exhibit 3: Intercarrier voice settlement scheme

Inter-carrier voice settlement scheme
Credit: Delta Partners

Major telecom operators Telefónica, Telstra, HGC Global and BT later joined the trial. Private blockchain is the key to making this solution attractive as it does not require the huge computational power of public blockchains to ensure security (as only a limited number of ledger is required) and limits the application’s cost.

Eran Haggiag, co-founder and executive chairman of Clear said the solution could potentially:

• Improve trust across operators and security. Intercarrier settlement is an area where fraud costs $17 billion annually for operators and dispute resolution is complex;

• Save costs, like overheads required for legacy settlement and intermediaries (carriers of carriers); and

• Expedite the entire settlement process.

Click here to read more about the role of blockchain in telecommunications.

This article was originally published in full by Delta Partners: