New blockchain and connectivity solutions disrupt the telco space
- Blockchain could save billions of dollars for telcos
- Connecting IoT devices all over the world
- Surviving the innovations of smaller companies
The global telecommunications industry is in a state of constant flux, always striving to adapt to the latest technological developments and changing customer demands. One of the most important factors in the ongoing digital transformation of this sector is the rapidly growing number of smart devices. A recent report published by the GSMA estimates that 5.7 billion people, or nearly three quarters of the global population, will own a smartphone by 2020. Furthermore, about 73 per cent of smartphone users will be able to enjoy the benefits of a broadband mobile connection and use it to exchange billions of messages, calls, photos, and videos every day.
However, smartphones won’t be the only devices talking to each other. Connected cars, smart sensors, wearables, and other Internet of Things (IoT) devices will also communicate and exchange data among themselves, which will require an increasingly fast and global internet connection. On the surface, this sounds like good news for telecommunications companies (telcos), which are the main providers of mobile data and internet services, as well as their underlying infrastructure. The reality, however, is that new trends are destroying the existing business models of the incumbents in the $1.4 trillion global telecommunications industry, forcing them to rethink their role in the market.
The management consulting firm McKinsey & Company predicts that traditional telcos are looking at a compound annual growth rate (CAGR) of only 0.7 per cent worldwide through 2020. Telcos in Western Europe and in Central and Eastern Europe will experience a negative average growth of -1.5 and -1.3 per cent, respectively, while those in North America are expected to do only slightly better with a 0.3 per cent growth rate.
Blockchain could save billions of dollars for telcos
Blockchain technology offers a potential solution to many of the inefficiencies that plague the telecommunications industry, and it could even make telcos a competitive force in the market once again. For example, inter-carrier settlement, which involves one telecom carrier paying another for the minutes, texts, and data its users spend while in roaming, is currently one of the sector’s biggest pain points. Even though it’s a very complicated process, it’s still mostly done manually, which makes it slow, inefficient, expensive, and vulnerable to fraud. Blockchain could change that, though.
The Singapore-based Clear Blockchain Technologies has developed blockchain-based software that could make the inter-carrier settlement process faster, cheaper, and more reliable. “Telcos are at an inflection point,” says Gal Hochberg, a co-founder and CEO of Clear Blockchain Technologies. “There is an exponential need for data and telcos need to deliver new things but their ability to deliver value is limited. We can enable new services using blockchain.” Built on the Ethereum platform, the software has already been successfully tested by the telecommunications companies Colt and PCCW Global. In the trial, the companies used it to record, verify, and settle voice minutes. Thanks to blockchain technology, they were able to analyse tens of thousands of call records in a matter of minutes, a process that would typically take hundreds of hours of manual work to complete. “We have demonstrated how blockchain can transform the way we conduct business in the telecom industry,” says Colt’s CEO, Carl Grivner.
According to James Crenshaw, an analyst at the research company Heavy Reading, using blockchain for roaming mobile settlements could save telcos $650 million annually, or 0.04 per cent of total revenue. However, blockchain could have many other applications in the telecommunications industry as well, including fraud prevention, identity management, and mobile payments. Overall, the value of the blockchain in telecom market is expected to grow to nearly $1 billion by 2023.
Connecting IoT devices all over the world
IoT Analytics predicts that the number of IoT devices will grow to 10 billion by 2020 and 22 billion by 2025. As the number of IoT devices continues to proliferate around the world, so does demand for global broadband coverage. However, the vast majority of telcos are struggling to respond adequately to this demand, leaving many people, particularly those living in remote areas, without steady cell coverage or internet access. In recent years, low-power wide-area network (LPWAN) technology has emerged as a potential solution to this problem.
The French global network operator Sigfox has developed a global IoT network that uses Ultra Narrow Band (UNB) modulation to exchange radio messages over the air. The Sigfox network operates at frequencies of 869 MHz in Europe and 902 MHz in the US. Each message has a bandwidth of 100 Hz, a ‘payload’ of up to 12 bytes and takes an average of 2 seconds to reach the corresponding base station, after which it gets uploaded to the Sigfox cloud and forwarded to customer servers. Each device in the network can send up to 140 messages per day over large distances. In rural areas, the maximum range of transmission is between 30 and 50 kilometres, while more obstructions and noise reduce the range to between 3 and 10 kilometres in urban areas. The network consumes a minimum amount of power, which ensures extremely long battery life. All of this makes the Sigfox network particularly suitable for IoT applications that require wide area coverage.
The technology has already been licensed by companies in 47 countries of the world, including the Australian tech company Thinxtra, which operates IoT networks based on Sigfox technology in Australia, New Zealand, and Hong Kong. The tech has been successfully deployed in a variety of smart city and agriculture projects, such as monitoring water tank levels on farms in New Zealand’s region of Waikato, monitoring speed and schools signs in North Island, and monitoring waste bins in the city of Christchurch.
Surviving the innovations of smaller companies
The rise of new technologies such as the cloud and the IoT, as well as the growing need for global connectivity, are having a profound effect on the obsolete business models of telecommunications companies. Agile startups have taken advantage of telcos’ unwillingness to change by offering innovative products such as blockchain-based mobile roaming settlement software, 5G-ready connected car platforms, and long-distance IoT networks. They’re essentially forming direct relationships with clients and demoting telecom companies to the role of infrastructure providers, costing them billions of dollars in lost revenue.
Dieter Gerdemann, a partner with the global management consulting firm A.T. Kearney, explains that “while telcos will not vanish entirely, they run the risk of being completely marginalized”. To reverse these negative trends, they will have to adopt disruptive technologies themselves and use them to upgrade their business models and develop innovative products and services of their own.