A comprehensive report from Mind Commerce Publishing maps the telecommunications network API industry and identifies some key business opportunities and challenges for the years ahead.
Telecom Network API Marketplace: Strategy, Ecosystem, Players and Forecasts 2015 - 2020 was released in May this year and was provided to ProgrammableWeb for review. The report is aimed at all parts of the telecommunication network (telco) API ecosystem, including industry investors, the telecommunications service providers themselves, mobile vendors, and the application developers and enterprises that may want to create new products and services with the telecommunications capacities afforded them via API.
The report finds that Internet of Things (IoT) API usage is set for the fastest growth within the communications industry. IoT-related APIs are expected to have an annual growth rate of some 75% and reach an industry value of $75 billion USD by 2020.
Overall, the whole telco API market is estimated to grow 26% each year, with a global industry revenue base of $167.5 billion USD by 2020. Annual forecasts with detailed data are provided in the report.
Dawn Stokes, Director of Customer Services at Mind Commerce Publishing, says the research team identified some key changes that lie ahead for the telco API sector:
Mind Commerce sees the Telco API space evolving significantly in the next three years. Over the course of the next 18 months, we see communications service providers (CSPs) solidifying their position in terms of B2B engagement with over-the-top (third party) competition and enterprise clients. This is at the expense of wireless carriers offering their own Value-added Service (VAS) apps, which we believe is imperative for network operators to avoid becoming only a bit pipe conduit for other’s content.
We also see CSPs making some attempts at facilitating a DevOps culture within their own development communities, especially when it comes to continuous development with carrier enterprise customers. This is important as the CSPs see enterprise customers as the key to their future revenues in the ever increasingly commoditized telco world. CSPs will leverage telecom data (via APIs) to ensure customer “stickiness” with enterprise.
From 18 to 36 months out, Mind Commerce sees a much bigger emphasis on IoT for carriers and the role for telco APIs in this strategy is to provide mediation data necessary for authentication, authorization, and accounting (AAA). The carriers will, in essence, position themselves as the key hub for all IoT traffic that is of a cross-entity nature (e.g., one company depends on another company’s IoT data). This is a huge growth opportunity for CSPs and Mind Commerce sees this as the largest revenue component in the long-term and fastest growing aspect of telco APIs, starting in the 2020 timeframe.
The research also identifies some missed opportunities that telcos and other ecosystem players could address. Stokes explains:
One of the biggest surprises Mind Commerce uncovered as part of our 2015 report update is that there remains very little in terms of return on investment (ROI) realization for internal CSP usage of telco APIs. This may be because there is little need to justify what is readily apparent – that carriers are saving substantial money by relying upon common APIs between business units/processes. However, we feel that CSPs are missing the boat when it comes to documenting these processes and procedures, and establishing a business case that could be transferrable to their own, highly-valued enterprise customers. None of the contacts we made had apparently thought about the need for enterprise to also benefit highly from common APIs for their own internal cross-data processes. We see this as a high potential growth area for CSPs, but they need to act quickly and leverage their own experience to better sell into enterprise on a consultative basis.
A Detailed Look at the Telco API Industry
The 213-page report includes 48 figures and tabled data and is split into twelve sections.
1. The Business Case for Telecom Network APIs
This section describes the disruptive force currently facing telcos as the core business moves from voice to data. As traditional circuit-switching technology is phased out in favor of digital tech, so, too, do traditional voice calling plans in favor of data services (which increasingly include voice-over-data models). As a result, telcos will need to build more value-added services (VAS) to maintain their revenues and profits.
This section also lists 23 types of telco APIs, including WebRTC, SMS, and the Rich Communication Suite Enhanced standard (RCS-e), IoT, location, voice control, subscriber data management (SDM) or identity management, number provisioning, and the international standard for Unstructured Supplementary Service Data (USSD).
Mind Commerce notes some of the competition challenges facing telcos as they seek to create new business models. They calculate that if telcos fully utilize the potential of opening network APIs to new partners, the move could be worth $52.4 billion USD globally this year, and grow at a rate of 26% each year over the next five years. What’s more, they see APIs impacting monetization models, where the majority of revenue generated from direct API usage now will change within the next five years to a model where almost half of all business API revenue will be generated from API-enabled finished products and services.
2. API Aggregation
Here, API aggregation is defined as service providers that can aggregate data from various carriers and provide a cross-carrier service. They give the example of Locaid, which is able to harness location data via API from a range of North American and Mexican telcos and then sell it back to carriers who need to send location-aware content to customers.
Newer aggregation services may be trickier to harness, according to Mind Commerce, which sees stiff competition, for example, in SMS API aggregation.
There are a range of other aggregation opportunities, but the report does not cover these in detail. For example, Nexmo offers the API aggregation service Verify that provides security and verification services to mobile app providers.
3. Enterprise and Telecom API Marketplaces
The researchers identify opportunities available to telcos by opening up the data they collect across their value chain. This is the Data-as-a-Service model: where telcos can collect data through their various operational processes and commoditize or monetize this data as a new service.
They also note the potential that, if they are opening up APIs and welcoming third-party providers to create new products based on these APIs, then a marketplace would be an ideal service to provide at both the individual carrier and industry-wide level.
The report lists Mulesoft (the parent owners of ProgrammableWeb) and Mashape as being the leading destinations for discovering APIs.
I think this discussion misses some major challenges. The first is how to create a discovery product that surfaces the most relevant APIs for a developer or enterprise’s needs. With over 14,000 APIs in ProgrammableWeb's API directory, even when you search by categories like telecommunications, the results can be overwhelming. According to ProgrammableWeb's editor-in-chief David Berlind, "the data model behind the various discovery tools needs to evolve in such a way that developers can more easily narrow such search results to the set of technologies (not just APIs, but SDKs, libraries, sample source code, etc.) that most closely meets their needs. Some of that evolution will be reflected in the set of changes we have planned for ProgrammableWeb in Q4 of this year." If Mind Commerce is suggesting a marketplace where users can locate suitable communications-enabled APIs, a robust discovery tool would be an important part of such an offering.