Can ecosystem models advance network API monetisation?

The network API opportunity

In our report Network APIs: Driving new revenue streams for telcos (April 2023) STL Partners forecast a revenue potential of more than US$22 billion globally for the top 11 network APIs by 2028 – a significant revenue opportunity for telecoms operators. Realisation of this potential depends on the telcos’ ability to select the right commercialisation strategy.

Telcos will need to distribute network APIs widely. For this, they could consider API distribution through:

  • their own platforms (providing services to large enterprises, e.g. T-Mobile’s DevEdge Platform in the US and Germany)
  • supply-side aggregators (similar to Twillio or Vonage)
  • system integrators
  • hyperscalers

But these options do have drawbacks. For example, telco-own platforms may struggle to scale (due to coverage limitations), margins and ability to add value through aggregators are limited, system integrator routes could also struggle to scale – and hyperscaler channels could risk ceding more control to these players than the telcos would like.

Work being done by the likes of CAMARA and the GSMA Open Gateway initiative to increase standardisation and interoperability of APIs may open up further distribution and commercialisation options in time. But additionally, we propose that telcos examine API distribution mechanisms that leverage the benefits of ecosystem business frameworks.

In our report Telco ecosystems: How to make them work (July 2020), STL Partners outlined several benefits of ecosystem business frameworks and why they can be particularly suited to new product and service areas where there is some uncertainty:

  • They support responsiveness to customer requirements (e.g., enable alternative feature bundling as the market moves).
  • They support continuous value-creation and innovation (partners bring in new service elements).
  • They support scale (the telco does not have to do everything on its own as more customers attract more partners, etc.).

The network API opportunity is still emerging and could benefit from the adoption of a flexible commercial approach, such as that presented by an ecosystem business framework. Ecosystem ways of working can encourage and make it easier for developers and enterprise to innovate, leveraging network API capabilities. In this report, we look at four examples of ecosystem-based business frameworks (the business models of existing companies) and consider how they might apply (hypothetically) to the network API opportunity – with a view to exploring the attractiveness of the approach for telcos navigating this area.

Our aim is to extend telco understanding of such models – as opposed to furnishing them with a specific recommendation regarding the commercialisation of network APIs – in the first instance. We wish to highlight the factors that telcos should bear in mind when considering ecosystem strategies.

Enter your details below to download an extract of the report

The ecosystem way

Ecosystem business frameworks are an alternative way of structuring economic activity and value creation versus vertical integration or linear, supplier-based frameworks. See Figure 3.

Comparing business frameworks

Source: STL Partners

The framework requires a strong customer value proposition in the first instance. In digital ecosystems, the value proposition typically involves using technology to link different aspects of a customer’s digital life in new ways (for example, Google Maps to show the way to a searched-for store). Once the value proposition is clear, the ecosystem creator (orchestrator) considers the components of the proposition and how to make it commercially viable (e.g. scale). They focus on their strengths within the set-up (what they do well) and invite others (suppliers/complementors) into the ecosystem to build out the proposition. This requires them to attract external stakeholders into an orchestrated business environment, where they share strong assets and capabilities with participants to help them create value for end customers (and the participant themselves). To be successful, ecosystems must therefore be designed with both customer and participant engagement and motivations in mind (insufficient participant engagement may mean supply-side failure).

Key requirements for a successful ecosystem are:

  • Putting the end-customer needs at the centre of an ecosystem to ensure the delivery of customer value (this requires a deep understanding of behaviour and motivations).
  • The ability to deliver an excellent experience for customers and participants to attract and maintain their engagement (i.e., minimising friction for all parties).
  • Enabling continuous innovation to deepen/extend relationships.
  • The ability to follow a dynamic strategic approach to enable the ecosystem to adjust, or even change direction, to accommodate unforeseen ecosystem consequences, as well as changes in customer requirements or market forces.

Table of content

  • Executive Summary
  • Table of Figures
  • Introduction
  • The ecosystem way
    • Why an ecosystem could be the best approach for APIs
  • An “association” approach – Mastercard
    • How does the model work?
    • How could this apply to APIs?
    • What does it take to work?
    • Evaluation of the approach
  • A vertical marketplace approach – Symworld
    • How does the model work?
    • How could this apply to APIs?
    • What does it take to work?
    • Evaluation of the approach
  • An OEM approach – Volkswagen/CARIAD
    • How does the model work?
    • How could this apply to APIs?
    • What does it take to work?
    • Evaluation of the approach
  • Use case marketplace – Amdocs
    • How does the model work?
    • How could this apply to APIs?
    • What does it take to work?
    • Evaluation of the approach
  • Conclusions and recommendations
    • How the ecosystem approaches are geared to succeed
    • Recommendations
  • Index

Enter your details below to download an extract of the report

Network APIs: Driving new revenue streams for telcos

Network APIs promise new revenues for telcos

Since 2020 there has been a resurgent interest in applications interfacing with the network they run over. The exponential increase in the number of connected devices and complex traffic, particularly video, is exerting pressure on network resources. Applications must become more aware of network and edge compute resource availability to meet increasingly stringent customer requirements as well as energy efficiency targets – for example, by prioritising critical applications. MEC allows data to be collected and processed closer to the customer (more information on edge computing is available on our Edge hub).

STL Partners forecasts the revenue opportunity created by mobile network APIs to reach over $20 billion by 2028 (the full version of this report provides a breakdown of the opportunity for the top 11 network APIs), as well as enabling powerful new applications that leverage programmable, cloud-native networks.

Increased network programmability will enable developers to build applications that require guaranteed connection speed and bandwidth, giving users/providers the option to pay a premium for network resource when and where they need it. The network APIs fuelling this market fall into two broad categories:

  • Network information APIs: Basic network APIs that provide real-time information about the network will reach extremely high volumes over the next decade. These will gradually be consolidated into the core network offering as a hygiene factor for all operators. Examples include network performance (information only), hyper-precise location, real-time device status, etc.
  • Network configuration APIs: APIs that instruct the network will not reach the same volume of usage, instead offering a premium service to a smaller pool of users wanting to define their network environment. Examples of these APIs include quality-of-service on-demand, slice configuration and device onboarding. These APIs offer a longer-term monetisation opportunity for operators, although there is little visibility around what developers and enterprise will pay for these services (e.g., pay per use vs. monthly subscription, etc.).

In this report, we explore the work that is currently happening to develop network APIs from a technical and commercial point of view, surveying the telecoms industry consortia that are proactively building the technical and commercial tools to make network-as-a-service a revenue-driving success.

Enter your details below to download an extract of the report

Two API domains: The macro network and MEC

MEC APIs control both the compute and networking elements at the edge. In the instance that a telco is operating and managing the edge site, these APIs come under their remit. In some instances, however, the MEC APIs could be defining edge or cloud compute not operated by the telco. Therefore, we do not consider all MEC APIs to come under the umbrella of network APIs (See figure below).

MEC APIs vs. Network APIs

Source: STL Partners

A MEC API is a set of programming interfaces that allow developers to access and utilize the resources of mobile edge computing platforms. These resources include computing power, storage, and network connectivity, and can be used to run applications, services, and tasks at the edge of the network, closer to the end users. MEC APIs can provide a way to offload workloads from the cloud to the edge, reducing latency and improving the performance of applications and services. CSPs must make a strategic decision on where to focus their development: general network APIs (quality-on-demand, location, etc.) or MEC APIs (edge node discovery, intent-based workload placement, etc.).

Need for reliable, real-time connectivity across a wide area will drive demand

Based on our interviews with application developers, we developed a framework to assess the types of use cases network APIs are best suited to enable. This framework sets out the network API opportunity across two dimensions:

  • The geographic nature of the use case: Local area vs. wide-area use cases. This influences the type of edge that is likely to be used, with local-area use cases leveraging the on-premiseedge and wide-area use cases better suited to the network edge.
  • Need for real-time vs. non-real time insight and response: This depends on the mission criticality of the use case or the need from the application point of view to be dynamic (i.e., adapt to changing circumstances to maintain a consistent or enhanced customer experience).

As network operators, telcos’ primary value-add is the ability to provide quality connectivity. Application developers leverage awareness of the network throughout their development process, and the ability to define the network environment enables use cases which require constant, ultra-reliable connectivity (see figure below).

Importance of connectivity features for developers

Source: STL Partners Survey (December 2022), n=101

Table of Contents

  • Executive Summary
  • Network APIs promise new revenues for telcos
    • Two API domains: The macro network and MEC
    • Need for reliable, real-time connectivity across a wide area will drive demand
    • Layers of API needed to translate network complexity into valuable network functions
    • Cross-telco collaboration and engagement of developers
    • Each industry fora focuses on specific layers of the API value chain
  • Operators must leverage multiple distribution channels for network APIs
    • Failure to standardise quickly allows other distribution channels to achieve greater scale
    • Operators must engage the developer community to play an aggregator role
  • Challenges and barriers: What needs to change
  • Conclusion
  • Appendix
    • Understanding the fundamentals of APIs
    • What are network APIs and what has changed?

Related research

Enter your details below to download an extract of the report