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Wholesale Blockchain from Concept to Reality In the 18 months since we first reported on the impact of blockchain technology on the Wholesale Telecom industry a lot has happened! The hype over the price of Bitcoin and the alt-coins has faded fast, although it is showing signs of a resurgence. But more critically, the thinking and clarity necessary to move blockchain from an interesting idea for the industry into a must-have mechanism for enabling serious efficiency gain, and supporting the launch of new services and applications, has become much clearer. In this article, we will explore some of the challenges and road-blocks that were in the way of a wide acceptance and implementation of the technology in the industry and how the leading players have steam-rolled many of them out of the way. We are now looking at serious implementations, rather than proofs of concept, before the year is out. Very exciting stuff!


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A recent report from HOT TELECOM revealed that many international carriers were interested in and were exploring the potential of blockchain technology, which we will now call by a more appropriate term - DLT or Distributed Ledger Technology. The report described eleven potential use cases for DLT adoption but the most popular was the use of smart contracts to address the invoice and settlement processes in a secure and fraud-free way. This use case is also by far the most advanced in terms of carrier implementation as most of the main challenges surrounding it have been identified. Potential blockchain use cases in order of interest from the world’s top 22 wholesalers: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11.

Rating processes Smart contract processes Invoice and Settlement processes Routing processes Automated provisioning Security and fraud Number portability Telecom payments Blockchain as a service SLAs 11. Remittance

CHALLENGES OF CREATING A DLT REALITY The basics of using a DLT for any cross business function are simple. All we need to do is to record shared information securely and immutably in a public ledger and run a smart contract process to confirm the completion of a task and make payment against it.

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But‌. the world of international telecom rates and settlement processes are both enormously complex and, at the same time, of seriously high volume. At the end of the day, each individual call (or message) needs to be reconciled by the two parties, recognized as part of a complex rating agreement, checked against volume or ratio commitments and then rated prior to settlement. Each carrier will have hundreds of different relationships, thousands of rate entries and millions of call records to be handled - without giving up key commercially sensitive data about relationships, destinations and volumes. The public and relatively slow nature of approving blocks to be written into the public ledger seems ill-suited to this task. In addition, a multitude of different BSS/OSS systems are in use across the carrier-ecosystem and need to be interacted with throughout the voice termination and settlement process. Overall, we assess that there are perhaps 6 key challenges to be overcome before we can truly say that Distributed Ledger Technology is ready for the mainstream. 1. Need for rapid scalability 2. Support of multiple use cases 3. Interoperability with different vendors 4. Interoperability with legacy systems 5. Need for privacy and accountability 6. Possibility of internal and external payments ADDRESSING THE CHALLENGES Based on the work that the Israeli company Clear has been undertaking in developing


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industrial scale DLT approaches, we believe that many, if not all, of the challenges above have viable solutions that will allow scale deployment of these DLT in the International carrier industry before the year is out. Proofs of Concept, as we noted, have already taken place, but scaling up the implementation from between 10s to 100s of carriers appears to be feasible by taking the following approaches to the key challenges mentioned above. Challenge 1: Scalability The challenge: Scalability is key in making blockchain a viable solution to support the telecom business now and in the future. It is important to note that we

have taken a broader view of scalability here. Scalability implies that the environment can handle the volumes of transactions that it must support, now and in the future. Furthermore, it also implies that the system can make use of new developments, approaches, or even design of the underlying ledger technology. At the base of this structure is obviously the choice of an underlying distributed ledger approach. As we know, the industry is far from consolidating on one choice and so an architecture that is able to support alternative approaches and migrate smoothly to a competing system resolves the major challenge of picking a winner now. However, that is only a part of the scale question. Simply assuming that all transactions between all

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major carriers can be written into one public changes to the block structure of the ledger. database will just not work. If the two parties continue to trust each other (and we will discuss trust later in this article), The solution: then the speed of writing to their private ledger, A production system that uses the Ethereum or the volume of CDRs it can support, no longer technology now, but is capable of being becomes an issue. supported by newer or more secure DLTs in the future is a key start. Within that architecture it is then necessary to use the chosen DLT to manage the scale of the business. To achieve this, separating all the control and business logic from the underlying ledger also becomes a critical part of the design choice.

Going further, we likely need an architecture such as that proposed by Clear, that can separate the ongoing high volume events that are occurring between each pair of partners (and does not need to be public) from those more aggregated events for which the industry more broadly has a valid interest. Deploying multiple parallel ledgers with one “public� ledger for the carrier environment solidly solves the volume issues around this very transactional business. When applying this concept to the voice termination business, we would consider that the voice settlement function is essentially one of multiple parallel bilateral relationships. Each carrier transacts with many other carriers, often reciprocally, but each relationship can be thought of as unique and separate.

Certain elements, such as the consolidated settlements that arise from all those transactions, will still be written securely into the core ledger and changes to that approved by consensus, but those changes are far less frequent or voluminous. Challenge 2: Multiple Use Cases The challenge: We can obviously see the challenge and opportunities around settling voice transactions. However, investments made in a significant infrastructure for the industry needs to be flexible and scalable enough to add incremental use cases as they are identified and developed. The solution: The solution here is to have clear distinctions between the software elements controlling the ledgers and the business processes that they are supporting. As an example, the Clear approach is to provide an open platform that exposes APIs and provides SDKs, and so enables the creation of an eco-system of vendors and developers that can accelerate to scale and serve the entire industry.

Each relationship has a contract, unique rates and destinations and associated volume Challenge 3: Vendor Lock-in agreements and so handling the overall scale of the business can be addressed by creating The challenge: unique private ledgers for each pair of carriers. No carrier wants to be tied to a single vendor solution and so a key question is how to As there are only two trusted parties involved develop an industry-wide solution that carriers in that relationship, there is no need to involve in general can use, while allowing each of them a wider audience of entities in the approval of to:

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• Develop its own new and innovative contracts with its partners • Adopt new use cases developed by other vendors (or even their own development teams) • Avoid the lock-in problems that industry wide solutions often involve. The solution: In a similar way to the solution for multiple use cases, having clearly defined interfaces between the different functions is a critical step. With those interfaces defined, solutions from different vendors can be introduced. This is similar to the way that software APIs allow the technology of the ledger itself, currently Ethereum, to be replaced in the future by a potentially better solution. Such open approaches are key to widespread adoption by global carriers. In parallel, having clear global governance is critical. Forming an approach where the major carriers and users of these systems can agree and confirm standards, and ensure that vendors deliver solutions meeting those standards, will ensure that open approaches continue to evolve across the blockchain network. Challenge 4: Interoperability with legacy systems The challenge: The range of systems in use in the industry is legendary. Many carriers have developed home grown systems, while others adopted the solutions of industry vendors. CDR collection mechanisms and formats are similarly complex while the exchange of rate and code information relied on spreadsheets for many years. All this needs to be integrated into the DLT based environment.

The solution: As we might expect, the answer is similar to the one above. Clearly defined and openly specified APIs and Software Development Kits (SDKs) to enable each carrier to transform their inputs into a common form that can be shared and worked on globally. While this is easy to say, there is considerable experience in recent years of standardization of rates and codes for exchange between carriers and so the building blocks are already in place in many areas. Challenge 5: Privacy with accountability The challenge: A major challenge in adopting open shared systems, such as DLT, is that each carrier wants to keep its relationships and traffic agreements private and secure. The open nature of existing public blockchains is not conducive to supporting this requirement. On the other side of the coin, there is a competing need for the broader community to be aware of any fraud or payment issues surrounding a problematic carrier. The solution: The solution starts with an agreed industry governance model, with members of the community being able to add new members after completing necessary “Know your Customer” checks. That same governance structure must also be able to penalize or ban a member if gross breaches are proven. The use of private channels to handle the detailed transactions between members keeps that information private and secure, and the application of mathematical techniques, such as Zero Knowledge Proof, can allow the network to verify the correctness of transactions without exposing the proprietary information in those transactions.

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Similarly, details about these cumulative settlements can be made “public� on the main ledger without the underlying identities being shown. Disputes over calculations of settlements can be cleared automatically with agreements over the scale of discrepancies that are acceptable. Concerns with potential payment issues can be handled initially by default notifications in the private channel to give the carrier an opportunity to resolve the issue without impacting their reputation. Unresolved defaults could then be published more openly on the main ledger to use reputation as a key way that the industry can avoid any major defaults or other frauds. Challenge 6: Internal and External payments The problem: There are two objectives when it comes to efficient telecom payments. On the one hand there is a desire for a frictionless and very low cost way of handling payments between carriers. On the other hand, there also needs to be external interfaces with banks and financial institutions to allow escrow accounts in fiat currencies to be established. The solution: A stable coin currency similar to the SDRs used in traditional bilateral arrangements in the last century, could address the first objective. This DLT-based currency could facilitate quick and smooth settlements and enable multiple carriers to net relationships between them without transaction costs. As, Blockchain systems were initially established to cater for exactly this requirement, handling frictionless settlements is not seen as a major problem once the governance model is agreed for the community.

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From there, to address the second payment objective, this private currency would have to be converted to ones that carriers can use to pay external suppliers. There are many complexities around this area and so working with vendors, such as Clear, who have already developed solutions tackling these issues will likely pay dividends. ULTIMATE WHOLESALE EFFICIENCY IS IN SIGHT Based on our analysis of the approaches currently being developed and trialed, we believe that the wholesale industry is close to having a workable commercial blockchain solution that could be rolled out this year. That is quite a prediction, but we believe the necessary capabilities are in place with key vendors such as Clear. Assuming the Global Leaders Forum of major carriers continues focusing on this area, production systems could be adopted by some of those carriers by the fourth quarter of 2019, with much broader rollout to carriers in the second half of 2020. After many attempts to solve the efficiency and fraud issues of the current settlement regime, we may be seeing the start of a far more efficient and cost effective solution quicker than we may have expected. Building on that, we can expect to see this underlying infrastructure being used to solve newer issues as they develop, supporting more complex on-demand products and services that need to be established co-operatively and still be open to industry-wide verification and settlement. It will be exciting to follow this development through the rest of this year!


ABOUT THE AUTHOR Steve Heap CTO HOT TELECOM Steve has a lifetime of experience in designing, engineering and operating networks, both domestic and international. With leadership experience in small technology start-ups through to global service providers, he has deep experience in a wide range of products, technologies and geographies. He has the rare skill of being able to explain complex technical issues in easily understood concepts and uses that extensively in his consulting work with HOT TELECOM.

ABOUT CLEAR Clear builds blockchain-based settlement and clearing networks for global industries Clear was founded early 2018 by a team of seasoned entrepreneurs to remove friction in complex B2B trade. It has created a business environment where true data confidentiality is achieved, allowing smart B2B contracts to be created and executed automatically, thus enhancing industry efficiency and driving new revenue opportunities across global industries. This new shared environment also allows for payments to be guaranteed, allowing clearing, and eliminating the transactions fees and payment cycles associated with international transfers. To learn more, please visit http://www.clearx.io

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Profile for HOT TELECOM

Wholesale Blockchain from Concept to Reality  

In the 18 months since we first reported on the impact of blockchain technology on the Wholesale Telecom industry a lot has happened! The h...

Wholesale Blockchain from Concept to Reality  

In the 18 months since we first reported on the impact of blockchain technology on the Wholesale Telecom industry a lot has happened! The h...