The Telco Blockchain Bandwagon is Ready for Take Off

Ron Westfall – Research Director, Global Technology Telecom and Software

• Blockchain is generating many headlines, mostly related to cryptocurrencies like Bitcoin and the prospect of a new paradigm for fully secure and trusted transactions.

• Telcos are now getting on board what is being billed as the next $1 billion opportunity but must figure out how to work with their suppliers in building new capabilities, ranging from the elimination of hated roaming fees to new connected device services like drone deliveries.

As telcos continue to struggle across the board with declines in both revenue and profitability, blockchain is emerging as a technology with the potential to radically transform the telecommunications industry as well as many other industries. A recent forecast by ResearchAndMarkets predicts revenue from the telecom blockchain will increase by an 80%+ compound annual growth rate over the next five years to nearly $1 billion, while consulting stalwart Accenture sees the potential for a $1 trillion global telco blockchain ecosystem. Even with the wide variance in market forecasts, there is a broad industry consensus that blockchain will grow significantly and play a powerful role in transforming the telco business model and overall industry.

Reducing Roaming Fees May Be the Low-Hanging Fruit

Several operators, working with suppliers like Nexign and Bubbletone (see our report Nexign and Bubbletone Ready to Turbocharge the BSS Market with Embedded Blockchain Applications), are far along in testing blockchain to address immediate opportunities such as eliminating widely-loathed roaming fees. Through blockchain-enabled direct communications to mobile device SIM cards, mobile operators would love to offer their voice and data services to international travelers visiting in their coverage areas. The operators benefit by accessing a vast new customer base of travelers while avoiding costly integration into third-party systems or needing to invest in new complex systems.

Longer-Term, Telco Blockchain May Secure the Skies and Settlement

Operators on a global scale are preparing to capitalize on additional, more complex blockchain capabilities. Major operators BT, Colt, HGC Global, Telefonica, and Telstra are engaged already in a high-profile blockchain trial aimed at accelerating the settlement process of their wholesale services. Verizon is financially backing blockchain specialist Filament with the goal of using blockchain to ease the use and payment of connected device services such as drone-based deliveries and monitoring.

Can Operators Really Make Money with Blockchain

To be sure, blockchain carries great potential for telcos. However, there’s a catch: operators have traditionally struggled to sell anything beyond voice minutes and data bytes. Blockchain requires a level of technical know-how and marketing sophistication that won’t come overnight. Telcos must show they can use these ongoing blockchain trials to quickly deliver new services and features. They will need to hire and train personnel that understand blockchain technology, and adapt their networks to take advantage of distributed ledger capabilities.

The evidence indicates some operators will be ready to use blockchain-enabled capabilities like widespread elimination of roaming fees before the end of 2018. Longer term, and if done correctly, the ramifications for the telecommunications market are immense as operators as well as their customers and partners stand to gain significant customer experience and financial gains from blockchain-powered, fully-trusted and streamlined communications and transactions.

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