China’s ‘big three’ telecoms operators look to ring in changes with blockchain tech

China’s three major telecommunications network operators are joining forces in a project to boost their industry’s operations with blockchain, accelerating the country’s broader initiative to foster and lead the development of the technology behind cryptocurrencies.

China Mobile, China Unicom and China Telecom are jointly driving the new effort, which forms part of the Trusted Blockchain initiative of the China Academy of Information and Communications Technology (CAICT), a research body under the Ministry of Industry and Information Technology, according to a statement released by the academy last week.

The three Hong Kong-listed telecoms companies, which are the engines behind the world’s biggest mobile market by subscribers, are expected to focus on blockchain applications like those related to sharing data from their separate internet of things (IoT) networks and client identity verification, which could help drive down their combined operating costs, according to the statement.

It said Huawei Technologies, the world’s largest telecoms equipment supplier, will serve as the deputy head for the project.

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“In the next three to five years, we can expect to see more than 60 per cent of telecoms services use blockchain technology,” said former Huawei engineer Allen Li, the chief architect of Hong Kong-based blockchain start-up QLC Chain, which develops protocols for decentralised mobile network operations.

“Blockchain will not only help telcos lower operational costs for things like user identification, billing and content delivery network, but it will serve as the best solution to improve network security.”

Other companies involved in the government-backed telecoms blockchain effort include network equipment supplier ZTE Corp, payment services provider Union Mobile Financial Technology, and blockchain start-ups ChainNova and Qulian Technology.

A spokeswoman for the CAICT declined to make any further comments about the telecoms blockchain project. China Mobile, Unicom, China Telecom and Huawei did not immediately reply to separate inquiries for comment.

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The blockchain effort in China’s telecoms industry has come at a critical period for China Mobile, Unicom and China Telecom, as they ramp up preparations for the roll-out of 5G mobile infrastructure in the next two years.

Efforts to drive down the cost of operations, while improving network security would augur well for the mobile infrastructure upgrade planned by the three carriers.

The participation of Shenzhen-based Huawei and ZTE in the telecoms blockchain project also extends their role as the three carriers’ main suppliers for 5G network gear.

Blockchain enables the creation of an online database network where all participants create, share and store records of transactions in a secure and efficient manner, according to a white paper commissioned by the Hong Kong Monetary Authority.

The initial applications of that distributed ledger technology outside cryptocurrencies like bitcoin and ethereum have included post-trade settlements, record checking and management, and cross-border fund transfers, the paper said.

China helped raise the profile of blockchain when it became one of the first countries in the world to include the technology as part of a state-level policy. In 2016, Premier Li Keqiang announced that blockchain was written into the 13th Five-Year Plan, a road map for the country’s development in the five years to 2020.

The CAICT launched its Trusted Blockchain initiative in April, with the goal of exploring the technology’s use in major sectors, such as insurance, finance, supply chain and intellectual property rights.

At present, there are almost 200 companies engaged in the initiative, according to the CAICT. Internet companies Baidu, Alibaba Group Holding, Tencent Holdings and Qihoo 360, for example, are involved in a project that uses blockchain for cybersecurity. New York-listed Alibaba is the parent company of the South China Morning Post.

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The enthusiasm for blockchain, however, has been tempered by the government’s mixed feelings over cryptocurrency exchanges, initial coin offerings and cryptocurrency mining, which is the process of creating new digital currencies.

Although still in its infancy, blockchain is now being applied across a number of business use cases, according to the China Internet Report, co-authored by the Post, its tech news site Abacus and the San Francisco-based venture capital firm 500 Startups. Those applications include health care patient records, logistics, supply chain, IoT message and asset tracking, identity management, tracking of luxury goods and digital assets, and money remittance.