Leveraging DeFi to Build Next-Generation Telecommunications Infrastructure – By GIANT Protocol
Even before the pandemic struck, demand for connectivity was outstripping the ability of telecommunications providers to keep up. A 2019 report from the OECD estimated that up to $6 trillion in global investment will be needed over the decade leading up to 2030.
However, the pandemic put unprecedented new demand on the system, pushing internet traffic up by as much as 90% over a single year. Although telecommunications companies and governments have attempted to keep up, the average increase in bandwidth was behind at under 60%.
Addressing the Connectivity Imbalance
It’s hardly surprising that development can’t keep up with demand. Telecommunications companies (telcos) have very little ability to upgrade their infrastructure because they can’t get enough investment to build what the future needs. As they already carry a huge amount of debt, which is rising, telcos can struggle to gain access to credit from banks. Instead, they often end up renting out established infrastructure from other providers and simply pass on the costs to their customers.
The high-interest rates on bank credit also mean that telcos can only invest in those infrastructure projects which offer the highest possible yields. Smaller projects that may be profitable without the burden of high-interest rates simply don’t make it to fruition. Unfortunately, many of these smaller projects are the ones that would provide a vital lifeline of connectivity to poorer or rural communities, meaning they get left behind. Connectivity inequality, or internet poverty, is recognized by the UN as being a factor in broader financial and social poverty.
Ulrik Vestergaard Knudsen, Deputy Secretary-General of the OECD, perhaps sums up the urgency of addressing the connectivity divide with this quote: “We need to build back better from the crisis, and addressing the connectivity imbalance has become urgent to be able to achieve this.”
Using GIANT Protocol to Identify Investment Opportunities
GIANT is building a protocol that will aggregate all the options available from different data providers, allowing customers to choose their ideal packages in the moment, depending on their location and needs. The benefits for the consumer are clear – on-demand connectivity whenever and wherever you need it, without being tied into a contract or provider.
But is it a rum deal for the telcos, which will potentially miss out on revenue? Far from it. In fact, GIANT’s model offers huge opportunities for telco providers to leverage this flexibility to reach new markets, make even smarter investments, and more importantly, gain easier access to investment capital.
How would this work in practice?
Let’s imagine a telco executive who’s keen to explore new ways of doing business to avoid being left behind by emerging technologies. She signs up to provide data through GIANT’s Decentralized Internet Access Layer (DIAL), which allows her company to sell data that isn’t tethered to a customer’s SIM card. This allows the firm to reach new customers because anyone can buy a data package off the shelf without having any pre-existing relationship with the company.
After a short while, there’s enough data on new customers that the executive asks for some geographical analysis to determine if there are any opportunities in particular locations. She discovers a trend – most new customers buying ad-hoc data packages are based in rural areas where her company provides relatively good coverage, but other firms are falling behind. She also establishes that access to these customers is highly valuable from a number of perspectives. Her firm is known for providing more reliable access in time of need, which improves customers’ net promoter scores and makes it easier to acquire new customers.
What an opportunity! If the executive now pitches an investment idea to upgrade the infrastructure in this area, she has the facts and figures to demonstrate a viable user base and return on investment. Projects that may previously have been consigned to the loss-making bin can be reexamined with a fresh set of data.
Securing Investment Capital with DeFi
That’s not all. Rather than taking loans from banks, GIANT’s model offers an opportunity for telcos to leverage their biggest asset – their users. After all, a bank has little personal investment with the firm beyond the ability to charge interest on loans. Customers have more of a psychological investment in the firm as their provider of choice and because they provide the service the customer needs.
One of the key features of blockchain is that it allows the kind of peer-to-peer interactions that have spawned a $200 billion decentralized finance movement. Thanks to GIANT’s capabilities, telcos will be able to take advantage of these features to secure credit against future value of contracts.
How would this work? Let’s imagine that the telco is looking to scale up its 5G rollout with some infrastructural investments, promising customers download speeds of up to a gigabyte per second in major urban centers.
Rather than seeking a loan from the bank or government, the telco exec decides to leverage the existing contracts with customers who will benefit from the 5G rollout. The firm offers the customers the opportunity to pay the costs of their contracts in advance as a loan to the company. In return, the firm offers participating customers priority access and cheaper pricing on the new network.
In another scenario, the telco is seeking to upgrade connectivity infrastructure in a rural village. Rather than asking for a loan from the bank, she offers up the future revenue on the firm’s two-year data contracts provided to customers in the region.
Those same customers have a vested interest in getting their connectivity infrastructure upgraded. Any of them can decide to “prepay” their contracts as a loan to the company and charge interest for doing so. The customer’s interest rate as a lender would be bigger than they’d earn on keeping their savings in the bank. But from the telco side, the company is still paying less interest than they would on a bank loan.
This ground-breaking model doesn’t preclude or interfere with government investment or the ability of the company to obtain bank credit. It simply offers a new way of doing business, reaching new customers, and securing investment that complements the established company strategy. However, it would free up telcos from waiting for government investment to provide the connectivity infrastructure needed to service a growing global user base.