Can Blockchain bring an end to Roaming Fraud in the Telecom Industry?
Bob Greifeld, NASDAQ Chief Executive once said — “Blockchain is the biggest opportunity set we can think of over the next decade or so”. His prediction has come true in so many industries; Financial Services, Travel & Mobility, Retail & CPG, Healthcare — all of these industries are being shaped by innovative usage of blockchain technologies. Telecom is no exception, from cutting losses and increasing efficiencies to inventing new innovative revenue sources — blockchain has a lot to offer to the Telecom sector. In the era of falling voice revenues and extreme competition from the OTT players, Communication Service Providers (CSPs) will be looking forward towards reaping the benefits of blockchain technology.
Why Blockchain is the perfect technology to curb Roaming Fraud
First let us have a glimpse at what blockchain has to offer. At the very basic level blockchain is a kind of database where the data is stored as blocks which are chained together. Every new transaction is stored as a block which is connected to the previous block through a Hash code. Blockchain is a decentralized method of storing data. In a blockchain network there are several nodes which verifies different transactions. These nodes are typically known as miners who based on a consensus mechanism (e.g. Proof of Work, Proof of Stake) agree to a particular transaction and add a block to the system. Every node present in the blockchain becomes aware of the transaction which eliminates the need for a central authority to verify transactions. Blockchain is also immutable, any block stored in a blockchain cannot be altered or tampered with. These two features coupled with the facility to monitor the data in real time makes blockchain the ideal technology to eliminate the inefficiencies of the current roaming system and curb the roaming frauds which are rampant in the current system.
The current state of the roaming process in the industry
The above diagram captures the different parts of the process. When a subscriber of the home public mobile network (HPMN) is using its services in the visiting public mobile network (VPMN), then the VPMN queries the Home Location Register (HLR) of the HPMN to find out about the services that he/she is subscribed to. Next, as per the agreement between the VPMN and the HPMN, the VPMN sends TAP files containing the Call Data Records (CDRs) to HPMN via Data Clearing House multiple times in a day or week. The Data Clearing Houses are responsible for the transmission and conversion of the TAP files. The HPMN must settle all the costs incurred with the VPMN according to the roaming tariffs.
How do Roaming Fraud occur?
When a fraudster uses HPMN while he/she is in the VPMN territory, HPMN still must bear the costs of those transactions. A frequent example is when a SIM card gets stolen or cloned and gets used outside of the home network. Sometimes these can amount to very high numbers, with estimates showing that CSPs lose more than $38 billion annually in roaming fraud, thus becoming a cause of concern for almost all CSPs.
The main disadvantage of the system is its centralized nature. Because of its centralized nature, it takes too long for the HPMN to identify frauds and take corrective actions and by that time they have already incurred the losses. And it is this centralized nature of the system, that makes it ripe for disruption through blockchain.
How can Blockchain save the day?
A permissioned blockchain is implemented among every pair of operators. Here a permissioned blockchain is preferred over a public blockchain to account for the sensitivity of the Call Data Records. Designated nodes act as miners who verify the transactions through different consensus methods like Proof of Work (PoW) or Proof of Stake (PoS). Agreements between the CSPs are implemented through smart contracts in the blockchain.
The above diagram depicts how blockchain can make the system much more efficient. Here the roaming pacts are implemented through the smart contracts of a blockchain. Automatic triggering through a smart contract occurs whenever a subscriber of the HPMN avails his/her service in the VPMN. This reduces roaming fraud as the HPMN can act upon any fraudulent transaction immediately. Blockchain also eliminates the need of a Central Data Clearinghouse which reduces the overall cost of the transactions. The blockchain also acts as the single source of truth (as it is immutable and transparent) which reduces disputes between HPMN and VPMN to a great extent. The identity fraud can be curbed even further by using e-SIM instead of traditional SIM cards which will contain public-private keypair instead of IMSI.
And thus, implementing blockchain technology can make the system much more fraud-proof and save billions of dollars for the CSPs.
The implementation ecosystem for CSPs
Although blockchain has been around for almost a decade now, its application in solving different enterprise and business level pain points have started only recently in different industries. Different leading IT and Consulting service providers have added blockchain implementation capabilities to help the CSPs drive their business transformation in this domain. Many leading IT vendors have started coming up with their enterprise blockchain solutions. Many niche start-ups have also come up where they only provide roaming fraud-specific blockchain solutions to CSPs.
To curb roaming fraud globally, CSPs will need to partner up with each other as well as with different IT service providers or start-ups to build a sustainable ecosystem, for which the advantages are as follows:
1. Most of the leading IT players have strategic alliances with different blockchain vendors like R3, Ethereum, Hyperledger etc.
2. These players can also drive innovation by identifying different use cases of blockchain in Telecom through cross-industry leverage as they will be providing end-to-end blockchain solutions to many different industries.
3. The leading IT players have enterprise blockchain solutions which typically have the provision of both ready-to-use and customizable solutions. These solutions typically have an application that integrates the existing applications of the CSP with the blockchain ecosystem.
For instance, the architecture of the system is described through the block diagram below –
The CSP application layer connects with the IT vendor’s blockchain layer through secured APIs. Apart from smart contracts, the leading IT players also provide strategic analytics and insights to the CSPs through the help of the data captured in the blockchain database.
The IT vendors will enjoy the advantage of being a neutral third party in this ecosystem which has the possibility of becoming a very fertile source of revenue for them in the coming years.
The way ahead
We are living in a constantly evolving world where change is the only constant. Over the past few years, the CSPs have taken a hit on their voice revenue and this trend is predicted to continue in the foreseeable future. CSPs are under increasing pressure to find new revenue sources or to limit unnecessary losses.
Top Telecom players like AT&T, Telefonica, Verizon are leading the adoption of blockchain. Many industry-related consortia like Carrier Blockchain Study Group (CBSG), ITW Global Leaders’ Forum (GLF) have been formed who are actively looking into different applications of blockchain to improve interconnection.
The blockchain based roaming solution can go a long way towards finding a solution for the latter. The industry is moving fast — industry leaders like DT, Vodafone and Telefonica have already embraced the blockchain based roaming solution. Other CSPs will also need to collaborate, move fast and make the most of this revolutionary technology, or risk being left behind.
Sources:
1. Blockchain Investment in the Telco Industry. (2017). Ashurst. https://www.ashurst.com/en/news-and-insights/legal-updates/blockchain-in-telecoms-industry
2. Radio Design. (2020). What is Augmented Reality, and how does 5G enable it? https://radiodesign.eu/article-blockchain-and-the-telecommunications-industry-blockchain-5g-and-iot/
3. Ridgewell, P. (2020, September 2). Globe Telecom uses Blockchain to focus on roaming. TM Forum Inform. https://inform.tmforum.org/game-changing-technology/2020/02/globe-telecom-uses-blockchain-to-focus-on-roaming/
