Why is the Internet Computer not the blockchain of choice for telcos?
Fritz Milosevic
Founder & Builder at Hout Bay Haus | Transforming Corporates with Web3
Why is the Internet Computer (the “IC”) not gaining visible traction in the traditional telco industry, even though the full-stack cloud 3.0 vision and its decentralized network aligns well with the ethos, DNA, requirements and challenges of telcos?
And more so, why is the IC not the platform of choice for DePIN (Decentralised Physical Infrastructure Networks) projects in Web3? These are projects which have no, or very small education barriers with regards to understanding the IC. ?
This article is an overview of why I believe that the Internet Computer and the telco industry, specifically the mobile industry, are great bed fellows.?I am picking a few exemplary key areas relevant to the telco industry and illustrate how the IC could create the conditions for telcos to understand the Web3 opportunity better and to develop real use cases and solutions based on the IC network.
When I use the term “telco”, I refer in the first place to traditional, large mobile and fixed network operators. But the definition also includes the wider variety of value chain players such as smaller specialist companies, neo-operators, small cell vendors or pure infrastructure companies such as Towerco’s. I am excluding independent, carrier-neutral data center providers from this article, since Dfinity, the foundation and main contributor behind the IC, is already targeting them directly for the purpose of running IC nodes.?
What makes the IC attractive for the telco industry?
Several larger telcos, like Deutsche Telekom, Telefonica or Vodafone, have in the last few years deepened their activities in research, investment, testing and product development across the Web3 spectrum. ?These activities range from building and launching products to offering core Web3 services such as running validator nodes.
For many years now these telcos (and others) have engaged in industry-wide initiatives involving different types of players from across the telco value chain, as well as Web3 native firms. So far, the main aim was to increase the efficiency and security of, inter alia, transactions and settlements in the roaming and wholesale domains, and for Identity.
As far as I am aware, unlike any other Layer 1 network, the IC has “full stack” properties that make it unique in the Web3 industry, encompassing everything from using (existing) Web2 frontends to a complete backend which allows for secure, serverless computation, storage and authentication. Promising to reduce cost, complexity and cyber security risks.?
Some of the finer aspects that should be hugely attractive for telcos:?
Asset-leveraging DePIN?Playbook for telcos
The IC itself is regarded as one of the top DePIN projects worldwide - being one of the largest Decentralised Resource Networks (or DeREN, a sub-category of DePIN as per Mason Nystrom from Variant) with a market cap of over USD 5bn, almost 1500 nodes operated by about 130 independent node providers with what looks like an increasingly decentralised distribution of data center providers and locations worldwide (the US and EU are still the main aggregation regions). The absence of telcos from the list of node providers is notable.?Check out the IC dashboard if you want to see real-time data.
Current popular DePIN projects have either built their own chain (filecoin, IC, Storj) or launched on Polygon (DIMO, Fleek, XNET), Solana (i.e. Helium, Render, Hivemapper), or the DePIN-specific Layer 1 chain peaq (i.e. Natix, dTelecom, Silencio).?
The IC opportunity:
Leverage the existing DeREN stack, including the experience and track record gained with IC’s own governance decentralisation (Network Nervous System – the DAO that governs the IC) and built-out use cases for Physical Resource Networks (aka PRN’s, such as wireless networks, sensor networks – another sub-category of DePIN. I know, sorry!).?
What would be a game changer for telcos?
If the IC builds DePIN telco playbooks in a way that leverages existing telco assets and capabilities, making it a transitionary capability for telco’s en route to decentralisation. Meaning: Intelligently recognising the need for PRN’s to use spectrum, backhaul and core network capabilities of telcos in order for the PRN offering to close gaps in the current telco offering (i.e. Rural Connectivity, Mobile Private Networks, Venue Coverage). The perceived advantages of PRN’s in terms of roll-out speed, capital and operational efficiency through token incentive models for crowd-based ownership and operation of such networks can only properly be tested in conjunction with telcos (especially 5G DePIN’s are learning that the hard way at the moment). ?
I recently published an indepth article on DePIN cellular and Mobile Operators: DePIN needs Mobile Operators to go to the moon | LinkedIn?
Create a true Web3 MVNx ??
The MVNx (refers to the different types of Mobile Virtual Network players, such as MVNEs or MVNOs) industry has for the last 10+ years used digital business models and platforms as key differentiator vis-à-vis telcos (for retail and platform offerings). Digital native players are supposed to be leaner, faster, more cost-efficient (no legacy IT stack), more innovative and targeted due to digital tooling and modern data & analytics management. Often this is indeed the case, but not always.?
Existing DePIN players such as Helium or Really are ultimately just MVNO’s using existing telcos such as T-Mobile to offer nationwide coverage. Without these very conventional mobile wholesale agreements, these DePIN players would have no compelling offering for consumers and would battle to grow the demand-side of their new age “people powered” networks (hence never get the user base to a critical mass where it is commercially attractive to be a hotspot provider, even if it is only to cover the initial capex).?
Several Web3 projects in the MVNx and adjacent space have been launched, notably in the eSIM and airtime fields. Examples are Fonbnk, Fliggs and Giant.
To date, no “full stack”, end-to-end, Web3 MVNx players are in existence. Most of the projects address a small part of the MVNx value chain, mostly on the frontend side, using wallet capabilities as “Web3” differentiator, while using existing mobile wholesale offerings from telcos (directly of via MVNE’s) for connectivity and billing. That means that the billing, CRM and fulfilment related data and computation still resides and is performed by traditional Web2 software and infrastructure. Or as Chris Dixon, a Web3 Venture Capital OG from a16z, calls it in his book “Read Write Own”: they are under the control of “Corporate Networks” - centralized entities who can at any time decide to change terms or even switch of the API’s and services a MVNx is using. And that means that a good chunk of the advantages and reasons why people are drawn to Web3 offerings in the first place are in fact non-existent here.
The IC Opportunity:
The IC could attempt to find a suitable partner to jointly build out a full stack Web3 MVNE. Integrate south-bound with telcos for pure wholesale connectivity and wholesale billing, while running a fully decentralised Web3 stack on the IC for north-bound MVNE platform capabilities such as billing, rate plans, revenue assurance, digital products, marketing, CRM, frontends, SIM provisioning. Pragmatically, this would require the integration of a host of enterprise Web2 SaaS services within the IC, but typically services from very competitive segments (such as CRM), where the risks of vendor lock in and switching costs are low/ lower. Such a project would serve to demonstrate the ability of the IC to bridge existing Web2 enterprise services into a Web3 stack. I am of course not blind to the fact that my last 2 sentences are somewhat in contradiction to points made in the previous paragraph. One needs to be however pragmatic. Assuming that the entire tech and service stack a MVNx needs to deliver its service will be available web3-native in the short-term isWeb3-native in the short-term is not realistic, hence a Web3 platform that can bridge and combine Web2 and Web3 services is required. Decentralisation can then be achieved over time. ?
What would be a game changer for telcos? ?
Having an edge as telco
Edge cloud computing remains a double-edged sword for telcos, since they are forced by market dynamics and enterprise customer demand to partner with, invest in and offer hyperscalers’ MEC (Multi-access Edge Computing) solutions, yet they increasingly understand that they most likely will sit in the back of the monetisation bus in future. Few people can formulate the MEC challenge for telcos better than Dean Bubley:?
“Telcos' MEC edge-compute was supposed to take centre-stage against hyperscale cloud providers. Instead, MEC's main use is to host internal NFV or vRAN functions that run the network itself. Or enable some hyperscalers' own edge platforms on a wholesale basis, where they don't have other options. Meanwhile, edge-compute evolves in many other (non-telco) domains much faster, including on-device / gateway, or linked to non-3GPP technologies such as Wi-Fi and fibre.”
The topic evolves fast into the question of who will in future provide complete 5G-as-a-Service offerings, potentially completely disintermediating traditional carriers. Traditional telco vendors such as Ericsson, Nokia or Huawei or the hyperscalers? If it gets to this point, telcos will only be around as spectrum license holders and rent out these licenses wherever possible (this is of course a very simplified statement, since spectrum licensing so far serves as a great moat for telco businesses).?
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The IC Opportunity:
Making it easy for telcos to integrate their MEC into the IC and attract “real world” enterprise business and workloads. ??
What would be a game changer for telcos? ?
To have a public, decentralised cloud-based, high-performance MEC alternative, reducing hyperscaler-dependency and risk.?And possibly cost, if the promise of cheaper compute resources proves to be valid.
Enable Mobile Private Networks (MPN) for Enterprise customers
Mobile Private Networks (MPNs, also referred to as “Campus Networks”) are dedicated 4G or 5G communication networks that provide exclusive and secure mobile connectivity for specific organizations or entities in a geographically ringfenced area. They offer tailored services, such as enhanced data security, low latency, and prioritized bandwidth, catering to the unique needs of businesses, industries, or communities.
MPN’s are being used in various industries, including manufacturing, logistics, healthcare, and mining operations.?
In most markets enterprise customers can buy MPN solutions from telcos using their licensed spectrum but deploy the MPN network with an independent supplier (ie integrator or Neo Operator).?
A few countries offer a progressive spectrum regime, where frequencies between 3.4 and 4.2 GHz are available for local 5G MPN use cases. In these instances, the enterprise/ organisation can apply and obtain spectrum and the license directly from the regulator and roll out, operate and maintain the network entirely on their own (and do not need to make use of any telco).?
The IC Opportunity:
To develop an end-to-end DePIN use case on the IC specifically for System Integrators, Small Cell Vendors and Neo Operators, since they cater for a significant part of the MPN network market and could be open to new ways of delivering the MPN service. ? ? ?
What would be a game changer for telcos? ?
The use of a DePIN platform and network makes sense because they could
Bringing Web3-scaling & tokenomics to PropCo’s Venue Wireless Solutions
Cellular networks inside buildings are also referred to as DAS. A DAS (Distributed Antenna System) amplifies and distributes existing outdoor 3G/4G signals using a network of antennas and possibly active components to ensure in-building connectivity. In the 5G/IoT world, DAS architectures evolve into providing use case-based connectivity solutions.?
In future, more DAS’ are needed, even for venues of smaller size due to bad penetration characteristics of 5G. The denser 5G network footprint will eventually motivate telcos to look for additional capex savings. Property companies have in the past shown an interest to play a more active role in DAS markets and the willingness to strike partnerships with neutral-host DAS providers.
The DAS/ venue wireless solutions market is principally suitable for a DePIN play because of its lower complexity as opposed to the national cellular macro network. DePIN equipment and the DePIN business model seems to be suitable to be deployed in venues where backhaul is already in place, antennas/ access points are smaller and heavy radio engineering is less a requirement than for outdoor sites. Of course, any DAS DePIN operator still needs to consider all capex and opex in its financial planning and reporting. ?
The IC Opportunity:
To develop an end-to-end DePIN use case on IC specifically for Property companies, ideally in partnership with neutral host specialist providers such as boldyn or American Towers. ? ? ?
What would be a game changer for telcos? ?
For PropCo’s acting as neutral host providers or for neutral host providers the use of a DePIN platform and network makes tremendous sense because they can?
Conclusion - The Internet Computer could play a prominent role in enabling telcos transitioning to BusinessWeb3
When everything is said, and nothing is done – that’s a great time to reflect on growth options and to get ready for execution mode.
#BusinessWeb3 (aka Web3 Real World Adoption by companies) needs Web3 networks and communities to build bridges for traditional companies to make use of their fascinating tech.
The reality is, that most of the telcos themselves and their vendor ecosystem are far away from “Web3 thinking”. The possibilities of a new technology that not only changes the ownership model and agency of individuals to participate, but also makes hard commitments that companies and builders can trust and rely on when building networks and applications is not yet appreciated in the wider field.
I hope my above ideas and thoughts on the IC and its opportunity space in the telco industry stimulates a vibrant discussion and encourages the IC community to look at new ways of creating a value proposition that dials up IC adoption by telco companies.
Of course, the IC could be used in many more ways in the complex value chain that is modern telecommunications. I have selected a few prominent areas and stayed mostly in the connectivity domain. In future it will be exciting to get deeper into other areas such as a telcos internal IT, Customer Experience, the evolution of the service and product offering, devices, or the continued convergence of fintech and communications.
By the same token, the rationale and thoughts I have applied in this article to the IC would apply to other, similar blockchains which compare in scope and vision to the IC.
I might be biased because of my work experience in the past, but I suspect that an evolution of Web3 companies and communities towards the mainstream telco market and an investment in partnerships to execute telco industry use cases will be required to get traction. ?