From Leakage to Leverage: How Blockchain can Transform Telecom Revenue Streams | Blog
The telecommunications sector is on the cusp of modernization but faces multiple challenges to gain a competitive advantage. As per Everest Group, the total revenue from telecom services worldwide is expected to grow at -0.5-0.5% compound annual growth rate (CAGR) between 2023 and 2026.
This slow growth rate indicates that the telecom revenue streams need to adapt and evolve. It is undeniable that new revenue streams must be uncovered. As great as identifying new telecom revenue streams is essential, this revenue leakage also poses as a pressing issue for telecom operators, who often face significant losses from uncollected revenues, fraud, and billing errors.
The Communications Fraud Control Association (CFCA) estimated that US$38.95 billion was lost in 2023, owing to fraudulent activities in telecommunications sector. These fraudulent activities not only lead to immediate financial losses but also damage to the reputation of telecom companies – our analyst now look into how blockchain can transform telecom revenue streams in the face of this issue.
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Areas contributing to revenue leakage
The significant financial loss in telecommunications sector as mentioned above, emphasizes the need for comprehensive revenue assurance strategies, in order to identify and mitigate leakage across various areas of the business. Addressing below areas is critical for telecom companies, aiming to minimize revenue leakage.
- Fraudulent activities: This includes Subscriber Identity Module (SIM) card cloning, international roaming fraud, subscription fraud through application fraud or credit mule fraud, account takeover and premium rate service fraud
- Billing disputes: Mistakes such as incorrect pricing, inaccurate usage data, and disputes contribute to revenue loss. Issues such as customer disputes, billing disagreements, and non-payment further exacerbate the problem
- Network inefficiencies: Failures in network equipment, unauthorized access, and service disruptions can lead to leaks. These disruptions can cause service outages, leading to customer dissatisfaction and potential churn
- Intercarrier settlement issues: The intricate nature of intercarrier settlements and navigating a complex regulatory landscape that governs intercarrier settlements, requires precise data management and reconciliation processes. This directly impacts their revenue along with additional administrative costs
According to the CFCA, around 88% of telecom operators still rely on outdated Call Detail Record (CDR) based detection methods, to address the complex challenges of fraud, which contributes to revenue leakage.
This highlights the need to adopt advanced technologies like artificial intelligence (AI), machine learning (ML), and blockchain to effectively combat the revenue leakage problem faced by telecom operators.
Blockchain can help telecom operators mitigate revenue leakage by providing a secure, transparent, and tamper-proof platform for recording and tracking financial transactions. Here’s how blockchain can assist in a multifaceted way, 1) by curbing losses from revenue leakage and 2) by enabling new revenue streams
Blockchain to fix revenue leakage for telecom companies
Earlier this year a strategic alliance between Telefónica and Chainlink Labs was formed to enable Polygon-based smart contracts to query Telefonica’s mobile operators. Following that, China Mobile, one of the largest telecom providers signed an alliance with Conflux Network, to revolutionize digital identities with Decentralized Identifiers (DIDs), and blockchain communication hardware.
Let’s explore how blockchain can address revenue leakage challenges
- Automated billing processes: Smart contracts, governed by automated rules, can detect anomalies in usage patterns, billing data, and network traffic, facilitating early fraud detection. Automated billing processes ensure accurate calculations and prompt payments, while automated security protocols identify and mitigate threats, enhancing overall network security. Additionally, automating settlement processes reduces manual intervention and lowers the risk of disputes
- Automated settlements: Telecom enterprises have multiple vendors, providers and distributors. Blockchain creates tamper-proof ledgers for all transactions from multiple entities, making it difficult for fraudsters to alter data. The transparent and immutable records offer an auditable record of billing transactions, minimizing errors and disputes. A shared ledger for intercarrier settlements ensures accurate and timely payments
- Blockchain based roaming agreements: The distributed and interoperable ledger has data across multiple nodes, making it harder for attackers to compromise the entire system. Its seamless interoperability between different systems minimizes the risk of data discrepancies. By providing real-time updates on usage data, especially for international roaming, blockchain enables transparent and automatic settlements between carriers
- Integration into networks: The integration of blockchain into the networks encrypts and transmits sensitive information without any unauthorized access. Blockchain enables real-time tracking of network activity, allowing for the prompt detection of suspicious behavior. Critical network data stored on the blockchain is highly resistant to tampering and hacking
Exhibit 1 shows the revenue leakage areas addressed through use cases of blockchain:
Blockchain to provide new revenue streams for telecom companies
Telecom enterprises can co-create new services through new payment models, wireless sharing and blockchain as a service offering. Recently, Kuwaiti telecom operators have completed implementation of a blockchain technology to provide users with a transparent and tamper-resistant digital payment environment. This aims to bolster the security of mobile wallet transactions.
Listed below are some of the possibilities of new revenue streams with the synergy of blockchain:
Wireless Access Sharing
Blockchain can enable contracts for secure sharing local wireless access systems like local 5G and wireless Local Area Network (LAN) between individuals and companies. By combining blockchain and wireless access technology, telecom operators can create a highly efficient network that reduces the need for additional infrastructure investment like radio base stations.
This model allows to effectively utilize existing network resources while providing incentives to wireless access providers and ensuring security while sharing.
Micropayments and New Payment Models
With blockchain’s capability to handle micropayments efficiently, telecom companies can explore new pricing models for services such as content streaming or app usage. This allows for flexible payment options that cater to consumer preferences, potentially increasing overall revenue through higher customer engagement.
Blockchain as a Service (BaaS)
Telecom operators can develop and offer BaaS, allowing other businesses to build and deploy their blockchain applications on a secure network. This service can cater to various industries looking to implement blockchain solutions without the need for extensive infrastructure investments, thereby generating new revenue opportunities for telecom providers.
Conclusion
Blockchain holds immense promise for telecom companies grappling with revenue leakage, security challenges and the need to increase revenue. By harnessing blockchain’s transparency, security, and efficiency, telecom operators can significantly improve fraud detection, billing accuracy, network security, and intercarrier settlements.
The integration of blockchain technology in the telecom sector presents numerous opportunities for creating new revenue streams while addressing existing operational challenges. Embracing blockchain not only helps increase revenue but also fosters trust with customers and partners.
In a competitive landscape, adopting such innovative technologies will be key to driving growth and enhancing customer satisfaction. With blockchain, telecom providers can lead the way in digital transformation and secure their position at the forefront of the industry’s evolution.
If you found this blog interesting, check out our blog focusing on “IT In A Box” Edge Model: The Next Frontier Of Edge Computing | Blog – Everest Group (everestgrp.com)
At Everest Group, we run dedicated coverage on telecom, network services and 5G, by providing in-depth insights and analysis of industry trends, technologies, and innovations.
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