Whilst wholesale network interconnect may be an unglamorous part of the telecoms industry, it is the natural place for cryptoeconomic innovation.
Until now, I have been steadfastly ignoring the whole blockchain and cryptocoin space. In telecoms, the initiatives I’ve seen have fallen into one of two camps. Most are dull commercial opportunism that will have limited impact. The rest are doing profound computer science, but without a strong market draw. Bartr is the first one I’ve seen that makes me go “that one!!!” and get excited about a potential game changer.
This new “network inter-cash” technology can be thought of in term of what happened to the City of London in the mid-1980s. Historically the stock market was run on trust through an “old boys’ network”, being privileged men (and not women) who went to the same top private schools and elite universities. Trades were conducted with lots of manual processes and obscure jobs tied to inflexible rules.
The Thatcher government forced massive deregulation onto the market — a “Big Bang” — and the result was emphatic: a vast increase in business from an open trading system and automation. The massive finance centre in London’s former docklands is the overspill “money city” that wouldn’t exist otherwise. Bartr is about giving telecoms its own “Big Bang”, moving its trading systems from medieval to modern management methods.
The City exists as a trading hub on the Thames because it was a natural place to engage in exchange: imported and exported goods swapped for precious metals as coinage. Gold and silver are universal currencies, but are hard to transport around. Nevertheless, the receipts for deposits of gold and silver are also tradeable, and thus have formed the basis for the issuance of paper currency as IOUs for such underlying value.
Rather than selling physically valuable goods, telecoms is a virtual service. It is going through a series of fundamental evolutions, from messages and minutes in the past, to media and megabytes today. No matter what the stage of evolution, the business model is the same: charge for access to the underlying physical information delivery resource. Bartr creates the “smart contract crypto IOU receipts” that can be traded for telecoms resources.
Just as the historic port in London is merely one node in a global communications network, so is each telco just one local network in a wider network of networks. The wholesale market is how we create the illusion of a global system out of many local and international networks. The problem is that whilst the data itself is transported through well-established protocols like SS7 and IP, the money is not.
In wholesale telecoms, we’re still at the level of “jobbers” running around with spreadsheets. The packets move in milliseconds, and the money in months. It really is “digital medieval”, just with email and Excel taking the place of runners and scribes. Whilst it took 2000 years for the City of London to go from founding to its “Big Bang”, telecoms is doing the same journey to modernity in under 200 years.
The telecoms market comprises network operators who are naturally “long” on resources, and users who are naturally “short”. The present market is an illiquid one, without transparency, and with low trust. It is filled with fraud and inefficiency as a result. The Bartr protocol enables a fungible software-defined resource that is not only tradeable, but also transparent and trusted.
The business model is to charge a platform use fee, sell datamined insight (to fuel better trades), and enable higher-order financial service products to emerge. It eliminates a lot of FX risk, shortens the cycle to cash from 30 days to instant, and reduces the opportunity for error and fraud. Whilst the immediate commercial proposition extends the existing high-margin arbitrage business in voice and SMS, the long run is about delivering megabytes and media.
This is the “Windows OS” moment for the “IBM PCs” of the telecoms world: a crypto OS for global telecoms. Your network is nothing without interconnect. The ability to supply “proof of routing” is the basic capability you need to participate, and without it you’re likely out of the game. If you can do this, then you can turn ordinary minutes and megabytes into precious minutes and megabytes.
I see Bartr as triggering the summation of many shifts, mapped from other industries onto the telecoms business. In addition to the “Big Bang” of BSS automation between carriers, Bartr is also:
- The “Maerskisation” of telecoms, as the composable contracts of Bartr function as containers that make supply chain management and intermodal digital logistics into viable businesses.
- The “Uberisation” of telecoms, turning illiquid markets into liquid ones and moving the profit centre from the “cars” and “drivers” to the “trading platform”. This enables “surge pricing”, for quicker supply response to demand changes.
- The “Walmartisation” of telecoms, taking away inventory risk by separating the supply chain management from the retail brands. Unilever and Coca Cola don’t sell to Walmart; rather, they sell to the end user via Walmart, and only pay a platform fee to Walmart. The brand owners have a better idea of how much of what product to put into inventory, as they understands their market, and control the marketing budget and its demand stimulation.
- The “Toyotaisation” of telecoms, since there will be a growing demand for managed quality variation in the product that is being traded. There is a direct money reward to removing QoE risk from service quality variation. Better production systems will be required to deal with high-frequency trading and arbitrage.
- The “Lastminuteisation” of telecoms, allowing for perishable inventory and distressed contracts to be monetized rather than written off. “Marketing promotions” will pervade the supply chain, rather than being a purely retail affair.
- The “Bloombergisation” of telecoms, attaching a real value to predictive analytic insight that accurately forecasts future supply and demand. This creates a subsidiary market for actionable insight in order to drive more profitable trades.
- The “Geicoisation” of telecoms, making it feasible for new cloud entrants to “go direct” without having to do lots of network distribution deals. Today’s Verizon and Vodafone retail brands are a bit like consumer worrying about the difference between Castrol and Valvoline engine lubricant. Basically they are all fundamentally the same, since there’s a fixed supply standard, so you don’t really care.
My only reservation about Bartr is this: will telcos allow any intermediary to gain the kind of power over them that Bartr could possibly accumulate if successful? It may take a modified structure, more like the “chaordic” Visa network, to get the balance of power between the stakeholders right.
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