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Summary

Much of the discussion at the 31st Global Settlement Carrier (GSC) Forum meeting in Beijing this November focused on the feasibility of using blockchain technologies by international carriers to reduce fraud and streamline inter-carrier settlement. This followed the ITW Global Leaders' Forum's (GLF's) October announcement of a successful blockchain-enabled inter-carrier settlement proof of concept (PoC) involving six carriers, which are among the largest buyers and sellers of wholesale services.

Blockchain clears another hurdle to adoption by carriers, but it requires greater collaboration within the industry

Telecoms fraud is big business. The Communications Fraud Control Association (CFCA) estimates that telecoms fraud totaled $29bn in 2017, of which an estimated $17bn related to international traffic. This is an area of particular concern to the GLF, which is made up of leaders of the world's largest international carriers. The GLF was created to provide a forum for the discussion of strategic issues and to facilitate industry collaboration to assist growth of the international telecoms industry. An important recent GLF initiative in this area was the agreement of a code of conduct against fraud.

Fraudulent activity adds to the complexity of accounting for, and settlement of, payments between carriers for international traffic. Inter-carrier settlement can be a particularly complex and time-consuming process, especially when it involves currency exchange, multiple parties, disputes, and potential fraud. In an attempt to mitigate many of the operational challenges experienced by international carriers, the GSC meets twice a year, focusing on those challenges related to fraud prevention and mitigation, credit risk reduction, and the efficiency and accuracy of inter-carrier settlement.

The GSC and GLF are united in their work to ensure secure and frictionless settlement between international carriers. The GLF PoC demonstrates the feasibility of using blockchain in place of the existing cumbersome processes used for inter-carrier settlement, but full adoption of the technology depends on close cooperation and collaboration between players in the wholesale telecoms market.

Although there is a lot of interest among GSC members in the use of blockchain in smart contracts and inter-carrier settlement, there is also a healthy degree of skepticism. The proponents of blockchain technologies promise greater transparency, traceability, and security, through the use of distributed and immutable transaction ledgers that create a "shared source of truth among parties." However, questions remain about the technology's ability to scale and provide the necessary "telco-grade" resilience. Furthermore, the lack of standards and regulation, particularly for interworking between different blockchain implementations, and between blockchains and existing systems and processes (such as SWIFT), raises serious concerns among carriers.

Blockchain certainly has potential as a tool in carriers' digital transformation as they seek to reduce costs, delays, and fraud. However, many issues still need to be resolved before we can expect to see widespread adoption of the technology in inter-carrier contracts and settlement. More industry collaboration through organizations such as the GLF and GSC is required to help shape the development and adoption of blockchain in international telecoms.

Appendix

Further reading

Blockchain in Telecoms, SPT001-000029 (September 2018)

"Blockchain has more to offer CSPs than inventory management," SPT001-000019 (May 2018)

Blockchain for Beginners, IT0059-000071 (September 2016)

Wholesalers' Security Imperative, TE0012-000576 (June 2016)

Author

David James, Practice Leader, Wholesale Telecoms

david.james@ovum.com

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