Tag: decentralisation

Will web 3.0 change the role of telcos?

Introduction

Over the past 12 months or so, the notion that the Internet is about to see another paradigm shift has received a lot of airtime. Amid all the dissatisfaction with way the Internet works today, the concept of a web 3.0 is gaining traction. At a very basic level, web 3.0 is about using blockchains (distributed ledgers) to bring about the decentralisation of computing power, resources, data and rewards.

STL Partners has written extensively about the emergence of blockchains and the opportunities they present for telcos. But this report takes a different perspective – it considers whether blockchains and the decentralisation they embody will fix the public Internet’s flaws and usher in a new era of competition and innovation. It also explores the potential role of telcos in reinventing the web in this way and whether it is in their interests to support the web 3.0 movement or protect the status quo.

Our landmark report The Coordination Age: A third age of telecoms explained how reliable and ubiquitous connectivity can enable companies and consumers to use digital technologies to efficiently allocate and source assets and resources. In the case of web 3.0, telcos could help develop solutions and services that can help bridge the gap between the fully decentralised vision of libertarians and governments’ desire to retain control and regulate the digital world.

As it considers the opportunities for telcos, this report draws on the experiences and actions of Deutsche Telekom, Telefónica and Vodafone. It also builds on previous STL Partners reports including:

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What do we mean by web 3.0?

The term web 3.0 is widely used to refer to the next step change in the evolution of the Internet. For some stakeholders, it is about the integration of the physical world and the digital world through the expansion of the Internet of Things, the widespread use of digital twins and augmented reality and virtual reality. This concept, which involves the capture and the processing of vast amounts of real-time, real-world data, is sometimes known as the spatial web.

While recognising the emergence of a spatial web, Nokia, for example, has defined web 3.0 as a “visually dynamic smart web” that harness artificial intelligence (AI) and machine learning (ML). It describes web 3.0 as an evolution of a “semantic web” with capacity to understand knowledge and data. Nokia believes that greater interconnectivity between machine-readable data and support for the evolution of AI and ML across “a distributed web” could remake ecommerce entirely.

Note, some of these concepts have been discussed for more than a decade. The Economist wrote about the semantic web in 2008, noting then that some people were trying to rebrand it web 3.0.

Today, the term web 3.0 is most widely used as a shorthand for a redistribution of power and data – the idea of decentralising the computation behind Internet services and the rewards that then ensue. Instead of being delivered primarily by major tech platforms, web 3.0 services would be delivered by widely-distributed computers owned by many different parties acting in concert and in line with specific protocols. These parties would be rewarded for the work that their computers do.

This report will focus primarily on the latter definition. However, the different web 3.0 concepts can be linked. Some commentators would argue that the vibrancy and ultimate success of the spatial web will depend on decentralisation. That’s because processing the real-world data captured by a spatial web could confer extraordinary power to the centralised Internet platforms involved. Indeed, Deloitte has made that link (see graphic below).

In fact, one of the main drivers of the web 3.0 movement is a sense that a small number of tech platforms have too much power on today’s Internet. The contention is that the current web 2.0 model reinforces this position of dominance by funnelling more and more data through their servers, enabling them to stay ahead of competitors. For web 3.0 proponents, the remedy is to redistribute these data flows across many thousands of different computers owned by different entities.  This is typically accomplished using what is known as decentralised apps (dapps) running on a distributed ledger (often referred to as a blockchain), in which many different computers store the code and then record each related interaction/transaction.

The spatial web and web 3.0 – two sides of the same coin?

Spacial-web-Web3-Deloitte

Source: Deloitte

For many commentators, distributed ledgers are at the heart of web 3.0 because they enable the categorisation and storage of data without the need for any central points of control. In an article it published online, Nokia predicted new application providers will displace today’s tech giants with a highly distributed infrastructure in which users own and control their own data. “Where the platform economy gave birth to companies like Uber, Airbnb, Upwork, and Alibaba, web 3.0 technology is driving a new era in social organization,” Nokia argues. “Leveraging the convergence of AI, 5G telecommunications, and blockchain, the future of work in the post-COVID era is set to look very different from what we’re used to. As web 3.0 introduces a new information and communications infrastructure, it will drive new forms of distributed social organisation…Change at this scale could prove extremely challenging to established organisations, but many will adapt and prosper.”

Nokia appears to have published that article in March 2021, but the changes it predicted are likely to happen gradually over an extended period. Distributed ledgers or blockchains are far from mature and many of their flaws are still being addressed. But there is a growing consensus that they will play a significant role in the future of the Internet.

Nokia itself is hoping that the web 3.0 movement will lead to rising demand for programmable networks that developers can harness to support decentralised services and apps. In June 2022, the company published a podcast in which Jitin Bhandari, CTO of Cloud and Network Services at Nokia, discusses the concept of “network as code” by which he means the creation of a persona of the network that can be programmed by ecosystem developers and technology application partners “in domains of enterprise, in domains of web 2.0 and web 3.0 technologies, in domains of industry 4.0 applications, in scenarios of operational technology (OT) applications.”  Nokia envisions that 5G networks will be able to participate in what it calls distributed service chains – the interlinking of multiple service providers to create new value.

Although blockchains are widely associated with Bitcoin, they can enable much more than crypto-currencies. As a distributed computer, a blockchain can be used for multiple purposes – it can store the number of tokens in a wallet, the terms of a self-executing contract, or the code for a decentralised app.

As early as 2014, Gavin Wood, the founder of the popular Ethereum blockchain, laid out a vision that web 3.0 will enable users to exchange money and information on the web without employing a middleman, such as a bank or a tech company. As a result, people would have more control over their data and be able to sell it if they choose.

Today, Ethereum is one of the most widely used (and trusted) blockchains. It bills itself as a permissionless blockchain, which means no one controls access to the service – there are no gatekeepers.

Still, as the Ethereum web site acknowledges, there are several disadvantages to web 3.0 decentralisation, as well as advantages. The graphic below which draws on Ethereum’s views and STL analysis, summarises these pros and cons.

Table of Contents

  • Executive Summary
    • Three ways in which telcos can support web 3.0
    • Challenges facing web 3.0
  • Introduction
  • What do we mean by web 3.0?
    • Transparency versus privacy
    • The money and motivations behind web 3.0
    • Can content also be unbundled?
    • Smart contracts and automatic outcomes
    • Will we see decentralised autonomous organisations?
    • Who controls the user experience?
    • Web 3.0 development on the rise
  • The case against web 3.0
    • Are blockchains really the way forward?
    • Missteps and malign forces
  • Ironing out the wrinkles in blockchains
  • Could and should telcos help build web 3.0?
    • Validating blockchains
    • Telefónica: An interface to blockchains
    • Vodafone: Combining blockchains with the IoT
  • Conclusions

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Four goals for the data-driven telco

Becoming a data-driven telco

There have been many case studies over the last five years demonstrating the disruption caused by “data-driven businesses”, i.e. those using insights to understand customers, automate processes, change their business models and drive new revenues. In the future, this concept will become an integral part of what it takes to compete successfully, allowing organisations to understand and run all parts of their operations, work with their customers and partners and take part in external activities in new ecosystems. This applies to telecoms operators as much as any other industry.

This research builds on a range of reports STL Partners has previously published on strategic topics related to telcos’ use of data, including:

This research turns to the practical topics of delivering on these strategic goals. The diagram below offers an overview of the drivers and barriers affecting delivery areas such as telco data management and machine learning (ML) in the short and longer term.

Drivers and barriers to being a data-driven telco

Source: STL Partners

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What capabilities should telcos develop?

Telcos are reasonably sophisticated users of data, but their particularly complex web of legacy systems requires a good deal of work around data management and governance to enable the extraction of data sets to give 360-degree view of the customer – and increasingly to provide training data for algorithms.

In the mid-term, telcos that are successful in selling IoT and becoming ecosystem players will require new A3 to deal with the increasing number of services, devices, price points and parties involved in providing service to a customer. Our research suggests that there is a range of new A3 technologies that can provide the automation and intelligence for this, as well as for the underlying data management processes.

In the longer-term, A3 will speed up decision making, impacting company strategy, new product and service creation, and customer experience. Humans will increasingly be supported by AI-, ML- and automation-powered tools in their decision-making. A similar progression will occur among competitors in telecoms, and in adjacent markets, increasing the complexity and speed of doing business. Besides integrating A3 into human workflows, working at increasing speed will depend on getting richer insights out of the available data with techniques such as small data and creation of synthetic data.

Capabilities for a data-driven telco

Source: STL Partners

 

Table of contents

  • Executive Summary
    • Capabilities telcos should develop over the medium term
    • What will telcos focus on in the mid-term?
    • Next steps
  • Becoming a data-driven telco
    • Short term drivers
    • Barriers in the short term
    • Long term drivers
    • Barriers in the long term
  • Availability of data
    • Use of data fabrics
    • Better data labelling
    • Rise of synthetic data
    • More intelligent data selection
    • Telco strategies for cloud usage
  • Equipping people
    • Augmented analytics and business intelligence
    • Decision intelligence
  • Work on governance
    • Governance across the telco
    • Agility in governance
    • Governance for AI and machine learning
    • Ethical governance
    • Improved measurement of governance
    • Governance in ecosystems
  • Index

Telco 2030: New purpose, strategy and business models for the Coordination Age

New age, new needs, new approaches

As the calendar turns to the second decade of the 21st century we outline a new purpose, strategy and business models for the telecoms industry. We first described ‘The Coordination Age’, our vision of the market context, in our report The Coordination Age: A third age of telecoms in 2018.

The Coordination Age arises from the convergence of:

  • Global and near universal demands from businesses, governments and consumers for greater resource efficiency, availability and conservation, and
  • Technological advances that will allow near their real-time management.

Figure 1: Needs for efficient use of resources are driving economic and digital transformation

Resource availability, Resource efficiency, Resource conservation: Issues for governments, enterprises and consumers. Solutions must come from all constituents.

Source: STL Partners

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A new purpose for a new age

This new report outlines how telcos can succeed in the Coordination Age, including what their new purpose should be, the strategies, business models and investment approaches needed to deliver it.

It argues that faster networks which can connect tens of billions of sensors coupled with advances in analytics and process digitisation and automation means that there are opportunities for telecoms players to offer more than connectivity.

It also shows how a successful telecoms operator in the Coordination Age will profitably contribute to improving society by enabling governments, enterprises and consumers to collaborate in such a way that precious resources – labour, knowledge, energy, power, products, housing, and so forth – are managed and allocated more efficiently and effectively than ever before. This should have major positive economic and social benefits.

Moreover, we believe that the new purpose and strategies will help all stakeholders, including investors and employees, realign to deliver a motivating and rewarding new model. This is a critical role – and challenge – for all leaders in telecoms, on which the CEO and C-suite must align.

To do this, telecoms operators will need to move beyond providing core communications services. If they don’t choose this path, they are likely to be left fighting for a share of a shrinking ‘telecoms pie’.

A little history 2.0

Back in 2006, STL Partners came up with a first bold new vision for the telecoms industry to use its communications, connectivity, and other capabilities (such as billing, identity, authentication, security, analytics) to build a two-sided platform that enables enterprises to interact with each other and consumers more effectively.

We dubbed this Telco 2.0 and the last version of the Telco 2.0 manifesto we published can be found here – we feel it was prescient and that many of the points we made still resonate today. Indeed, many telecoms operators have embraced the Telco 2.0 two-sided business model over the last ten years.

This latest report builds on much of what we have learned in the previous fourteen years. We hope it will help carry the industry forwards into the next decade with renewed energy and success.

Other recent reports on the Coordination Age:

Table of contents

  • Executive Summary
  • Introduction
  • Industry context: End of the last cycle
    • The telecoms industry is seeking growth
    • Society is facing some major social and economic challenges
    • Addressing society’s (and the telecoms industry’s) challenges
  • The Coordination Age
    • Right here, right now
    • How would the Coordination Age work in healthcare, for example?
  • New opportunities for telcos?
    • The telecoms industry’s new role in the Coordination Age
    • Telcos need an updated purpose
    • This will help to realign stakeholders
    • A new purpose can be the foundation of new strategy too
    • Investment priorities need to reflect the purpose
    • New operational models will also follow
  • Conclusions: What will Telco 2030 look like?

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36 blockchain applications: What’s next?

Why is blockchain important?

Blockchain applications are valuable because they decentralise control. This offers a new way to reduce friction and speed up adoption of solutions that require collaboration between various players, but where no one wants to cede control to a single entity.

Collaborative ecosystems are only going to become more important in the Coordination Age, so mastery of blockchain technology can enable telcos to successfully address their customers’ changing needs.

But telcos are still figuring out what to use blockchain for

Based on an interview programme with telcos and technology partners, our research shows that one of the key barriers to adoption is finding valid use cases that are worth taking beyond the PoC stage.

Part of the challenge of knowing which applications are most worthwhile is that there are few large scale, real-world implementations of blockchain. This means that its key value proposition – that it can ease collaboration by removing the need for a centrally controlling authority, instead distributing power across all participants within an ecosystem – still needs to be proven.

Without many successful examples of blockchain-supported applications, it is difficult to know which ones are likely to succeed in telecoms. Telcos are therefore unsure of where to focus their time and investments.In practice, applications that leverage blockchain’s ability to broker trust through transparency and decentralisation are still at an early stage of development.

In the first report in this series, Moving beyond the lab: How to make blockchain pay we looked at eight of the most promising applications in telecoms in detail.

In this report, we look at a broader range of applications where blockchain is being tested to see if it can deliver better results than other technologies.

We explore 36 use cases across six categories, based on key blockchain capabilities:

  1. Tracking / registry: Recording information and data in an immutable and transparent way, whereby no party has asymmetric power over the data
  2. Data access / transfer: Enabling ease of transferring data between multiple parties
  3. Identity /authentication: Managing identities and permissions for authentication or verification
  4. Transactions: Enabling (real-time) payments and transactions
  5. Settlements: Revenue settlement by recording movement of goods/revenues or use of services/assets
  6. Token exchange: Virtual currency/tokens with intrinsic value traded between multiple parties

Key takeaways

  • Tracking / registry and data access / authentication are the two biggest categories in terms of use cases, reflecting the relative maturity of blockchain technology in addressing these pain points.
  • While enterprises are prepared to rely on the distributed ledger and shared consensus mechanisms of blockchain technology to support business processes, the regulatory and reputational risks of using cryptocurrency or tokens to exchange real-world value are still too high.
  • Therefore, there are fewer emerging use cases around transactions, token exchange, and to some degree settlements, and they will likely take longer to develop into viable commercial solutions.
  • Identity / authentication is one of the most technologically advanced application areas where blockchain is enabling enterprises to develop truly novel solutions for consumers, IoT, and to ease commercial partnerships. However, the business model is still untested at scale and/or not directly related to telcos’ core operations, so these applications can be difficult to justify as priority investment areas.

Overview of 36 telecoms blockchain applications

36 telecoms blockchain use cases

For each of these use cases, this report covers:

  • The current problem or pain point
  • How blockchain can help solve the problem
  • Which of the following blockchain characteristics are most relevant to the use case
    • Security: Decentralisation makes tampering with records or DDOS attacks extremely difficult
    • Cost efficiency: Shared ledgers can disintermediate middlemen
    • Traceability: Immutable, transparent record
    • Business process speed: Automation through smart contracts
    • Token value: Holding real-world value in digital assets, such as loyalty points
    • Neutral and equal: Shared ownership through consensus mechanisms
    • Confidentiality: Blockchain can enable collaboration without having to publicise sensitive information (particularly in a consortium/private application)
  • Type of blockchain most suited to the use case (public, permissioned public, or permissioned private)
  • The business drivers for telcos, such as:
    • Increase existing revenues
    • Decrease costs
    • New revenues: market disruption
    • New revenues: new market
    • Compliance / regulation
    • Customer experience
  • Real world examples in development or production
  • Potential challenges or barriers to adoption

Blockchain for telcos: Where is the money?

If you don’t subscribe to our research yet, you can download the free report as part of our sample report series.

Introduction

Looking at existing players in the industry, there are two business approaches to blockchain.

Blockchain to make money

Blockchain to save money or do something new

In this report, we look at how these business models apply for telcos seeking to participate in blockchain ecosystems for digital identity and IoT.

We will also present this report in a webinar on Tuesday, June 19th – register here

Contents:

  • Overview of existing blockchain business models
  • Telco monetisation models in:
  • Digital identity
  • IoT
  • Conclusion & recommendations