A deeper dive into the 5G network API opportunity

AT&T's Stephanie Ormston has been charged with building a business around network APIs, and she's ready to make that happen.

"The network is the killer app," she explained to Light Reading in a recent interview. Meaning, APIs are a way to further expose a network's killer capabilities.

Ormston comes across as smart and earnest, and is clearly a rising star within the operator. She previously led AT&T's merger work with Time Warner, bouncing through the operator's short-lived Xandr advertising operation, and then heading up privacy and data strategy in AT&T's WarnerMedia business.

After AT&T exited the content space by combining WarnerMedia with Discovery, Ormston became AT&T's assistant VP of digital services Integration. Today, she's working on a "strategy and roadmap for network digitalization and exposure of network services through an API-enabled platform."

Thus, Ormston is on the front lines of a global push in the wireless industry to sell new networking capabilities to enterprise developers via application programming interfaces (APIs). It's an initiative enabled by 5G – this kind of thing wasn't really possible in a 4G world. Further, the importance of the network API push has been rising as 5G operators struggle to find other ways to generate returns from their massive 5G network investments. Autonomous cars, metaverse goggles and robot surgeons haven't really materialized in a big way, and now 5G operators like AT&T are looking for other ways – beyond fixed wireless – to make money from 5G.

Could the sale of network APIs help operators recoup their big 5G investments?

High expectations

According to Ericsson, telecom research and consulting firm STL Partners predicts that the revenue opportunity created by mobile network APIs will grow to over $20 billion globally by 2028.

That's nothing, according to McKinsey. The management consulting firm estimated that, over the next five to seven years, the network API market "could unlock around $100 billion to $300 billion in connectivity- and edge-computing-related revenue for operators while generating an additional $10 billion to $30 billion from APIs themselves."

McKinsey's study was commissioned by the GSMA, the global wireless industry trade organization working to rally network operators around the topic. GSMA launched its "Open Gateway" network API campaign last year. Earlier this year, at its MWC Barcelona trade show, GSMA said that 47 mobile operator groups, representing 239 mobile networks and 65% of wireless connections around the world, have now signed up to its Open Gateway initiative.

And the program continues to make progress. A month after the MWC Barcelona show, the three big wireless network operators in China introduced the One Time Password API in the country. It promises to improve security by allowing banks, social media companies and others to send passwords through texts.

"Our collective job for 2024 is to nurture and grow this opportunity and provide ubiquitous access to enterprise developers and cloud providers, so they can do what they do best, which is launch game changing new services that can maximize the benefits of 5G networks," Mats Granryd, director general of the GSMA, said in a release.

Of course, some are skeptical. McKinsey's $300 billion estimate "seems based on unrealistic expectations," Disruptive Wireless analyst Dean Bubley wrote in a brief LinkedIn post. "This looks overcooked."

We've been here before

AT&T's Ormston acknowledged that this isn't the first time wireless network operators have tried to build businesses around application development. Other such programs include the Wholesale Applications Community and the OneAPI Exchange.

"This story started 10 years ago or more," Ormston said, explaining that AT&T's moves toward network virtualization, 5G and, more recently, Azure for Operators have helped set the stage for its newest network API efforts. "All of those parts are foundational to where we are today," she said.

For some, it's been a rough road. According to Jonathan Davidson, EVP and GM of Cisco Networking, the company developed an API-based private wireless networking product around five years ago. "We actually ended up killing that product," Davidson said during a MWC Barcelona media event. He said the product spanned 300 APIs and customers were overwhelmed.

"I want one API," they said, according to Davidson. And so Cisco went back to the drawing board and developed its current private wireless offering, which runs through a single basic API.

API "hygiene" is important, Davidson explained. 

But even if APIs are tidy and hygienic, how will AT&T profit from turning its network into an API-based "killer app?"

"We have a lot of different go-to-market notions," Ormston said, explaining that AT&T wants to make sure it can maintain a flexible business model for whatever network API opportunities pop up – today and in the future.

Meaning, AT&T isn't quite sure how things are going to develop, and doesn't want to plant a flag just yet.

"We're the prep kitchen and we're the pantry," Ormston explained, noting that AT&T is working with the same basic set of ingredients as every other network operator. The trick, she said, will be to create new entrees with those basic API ingredients.

"It's less about the APIs and more about the capabilities," she said.

In the footsteps of Twilio

Many in the wireless industry acknowledge that the new network API push is based in part on the pioneering work of Twilio. Founded in 2008, the tech company essentially bought wholesale access to network operators' text messaging systems in order to resell that capability to the likes of Uber, Doordash and Airbnb.

"Twilio did a fantastic job in setting forth that expectation," Ormston said.

Meaning, when you receive a text message from Uber telling you your ride is ready, that message passed through the texting API designed by Twilio. Thus, Twilio has built an $11 billion business on the back of operators' text messaging services.

For some in the industry, that's good news. It means APIs for text messages carry significant value. And that value represents just the tip of the iceberg, considering the GSMA and its partners are developing a wide range of APIs for everything from text messaging to location information, billing, quality of service and network slicing.

Others, though, see Twilio not as a pioneer to emulate but as a middleman to squeeze.

"In recent years, multiple major US mobile carriers have introduced A2P [application to person] SMS service offerings that added a new fee for A2P SMS messages delivered to their respective subscribers, and, from time to time, other US mobile carriers have added similar fees," Twilio warned in a recent SEC filing. "While we have historically responded to these types of fee increases through a combination of further negotiating efforts with our network service providers, absorbing the increased costs or passing the fees through to customers, there is no guarantee that we will continue to be able to respond in these ways in the future without a material negative impact to our business."

Moreover, Twilio's overall corporate trajectory stands as a bit of a warning to companies hoping to profit from networking APIs. Twilio's shares have fallen in recent years as the company struggled to develop new lines of business.

Still, Twilio's core operation remains intact. The company reported that its Communications division – which houses text messaging APIs along with others for voice calling, email and other such services – notched income of $523 million in 2023, up 164% over the same period a year ago.

Twilio's $523 million is a far cry from STL's $20 billion forecast, and it is certainly dwarfed by McKinsey's $300 billion figure. But Twilio doesn't offer the kinds of capabilities – like location data and network slicing – that the GSMA is touting.

On the other hand, there is precedent in the wireless industry for spectacularly optimistic estimates crashing into a more mundane reality. For example, at one point Nokia suggested the private wireless networking opportunity could span up to 14 million cell sites worldwide, double the number of sites in commercial networks. More recently, research firm Analysys Mason projected that spending on private wireless networks globally will account for less than 5% of the equivalent spend on public networks.

Going to market

So, Twilio proved there's a market for network APIs. But how will the thousands of companies in the global wireless industry provide those APIs to enterprise developers in a tidy and hygienic fashion?

First, it will involve getting everyone to work off the same API blueprint. That way applications built for one network can be easily put onto other networks. And that's already happening.

The GSMA's Open Gateway initiative is based on CAMARA, an open source project for APIs driven by the Linux Foundation. Other players in the space, including the TM Forum and its Open Digital Architecture (ODA) effort, have said they will work alongside the GSMA's Open Gateway initiative.

However, there will not be a single source for those APIs, like Twilio. There will be lots.

According to the GSMA, Ericsson, Microsoft, Amazon and Nokia are among the vendors aggregating operators' network APIs. And each is working to round up additional network operators into its respective system. For example, Nokia has announced deals with Telia, BT, LG and Dish Network. Microsoft, meanwhile, has teamed with AT&T, Deutsche Telekom, Orange, T-Mobile, Telefónica, Verizon, Vivo and others.

It also appears that few, if any, of these arrangements are exclusive. For example, Ormston said AT&T is "in conversations" with most of the market's API aggregators. Separately, Ericsson's Vonage said it will put some of its APIs into the Amazon Web Services (AWS) Marketplace. And TikTok went straight to Telefónica for the operator's Number Verification API.

It's also possible that far more players will enter the sector if it gains steam. "There's money to go around. We're pretty sure of that," Bob Everson, a top executive in Cisco's mobility business, told Light Reading.

Everson said Cisco has years of experience with networking APIs through its DevNet program. More recently, Cisco acquired Norway's Working Group Two (WG2), which was working on network APIs before the launch of the GSMA's Open Gateway program.

Everson said Cisco is still figuring out how it might work with Amazon, Microsoft, Ericsson, network operators and others for network APIs. "You'll see an evolution" in Cisco's strategy, he suggested.

Analysts are keeping tabs on how the API aggregation market is evolving.

"The other main contenders for network API aggregation are Infobip and Amazon Web Services (AWS). Google has been less visible but recently announced a collaboration with ClearX to make Open Gateway APIs available via its cloud console. Another notable vendor is LotusFlare whose BSS suite is used in T-Mobile's DevEdge developer marketplace and Deutsche Telekom's MagentaBusiness API portal," analyst James Crawshaw, with research firm Omdia, wrote on LinkedIn. Light Reading and Omdia are both owned by Informa.

All that API jostling among network operators, equipment vendors and hyperscale companies like Amazon and Microsoft could make it difficult for developers to negotiate. But it could also help the sector overcome a traditional challenge in early stage markets.

"When it comes to network APIs, the telco industry has a classic chicken-and-egg dilemma," the analysts at McKinsey wrote in their report on network APIs. "Without strong demand from enterprises, most telcos have been hesitant to invest in this area. But without a robust supply of user-friendly, fully interoperable APIs – and proof points attesting to their value – enterprises are looking to other technologies to meet their needs."

Engaging with developers

Wireless network operators are investing in the networking technologies – such as 5G – that can open APIs into their operations. The GSMA and others are standardizing those APIs. And companies ranging from Microsoft to Ericsson are offering those APIs up to developers.

But how will developers react to all this excitement?

Sixty percent of the 314 developers surveyed by consulting firm Kearney said they would implement 5G APIs within a year if they had that option. Further, the firm said 63% believe that 5G connectivity would bring significant value to their projects.

Another study highlights an acknowledgment among developers of the value of APIs. A 2023 survey of 40,261 developers by API development company Postman found that 60% of respondents viewed their APIs as products. Tech companies ranging from X (formerly Twitter) to Reddit already have begun charging for API access into their systems.

But the Kearney survey also highlights developers' coverage demands. It found that 77% of developers will need full coverage of a country to make use of 5G APIs. And 51% need multiple countries covered.

So how should the wireless industry go about engaging with those developers? "Promoting APIs through marketplaces and other developer-specific channels can improve targeting and enhance exposure to a more promising audience," the analysts at Kearney wrote.

Others agree. "Operators' own developer portals are unlikely to be the main distribution channel for network APIs. However, the operators' developer programs can help them to co-create and innovate with their enterprise customers, tailoring solutions to solve specific problems or develop new services," Omdia's Crawshaw wrote on LinkedIn.

As with most tech platforms, it's likely that the hyperscalers will be the ones to watch. "When it comes to API gateways or cloud API management tools, two solutions stood out. Half of all respondents used AWS API Gateway, and more than a quarter used [Microsoft's] Azure API Management," according to the findings from Postman.

What the APIs can do

This is the part of the story – network API demos – that got all the attention at the recent MWC Barcelona trade show. Practically every major exhibitor at the show devoted at least some attention to the topic. Here's a selection of some of the most noteworthy or interesting API demonstrations:

A wide range of other companies offered similar demos. On its website, the GSMA lists a total of 17 APIs in its Open Gateway initiative. Some may require an operator to deploy the standalone (SA) version of 5G. As of March, the GSA had identified 49 operators as having deployed, launched or soft-launched standalone 5G in public networks.

"The APIs that seem to be of greatest interest so far are anti-fraud-related: 25 operators have launched SIM Swap APIs, and 22 have launched Number Verification. QoD [Quality on Demand] is less common given the technical challenge of implementing this capability in the network," wrote Omdia's Crawshaw.

Chivas Nambiar, one of the top executives in AWS' telco business, suggested that companies in the financial sector would be keen to use the SIM Swap and Number Verification APIs to prevent fraud. "That is where I expect most of the revenues to come from" in the early days of the industry, he said during a MWC Barcelona media event. "But it's very early in the game."

Savinay Berry, EVP of product and engineering for Ericsson's Vonage, agreed. Speaking at a MWC Barcelona media event, he said authentication APIs will be among the first to be used, while others – like Quality on Demand – will come later.

There's also no one business model – or price – for such offerings. According to the Kearney survey, 59% of developers prefer offering 5G API-enabled features via subscription, followed by a usage-based model (45%) and via in-app purchases (41%). "Our study reveals that developers' preferences for offering improved connectivity was dispersed across models," the firm wrote.

The pricing on those APIs presumably will also sit on a sliding scale. For example, some standard cloud computing API calls cost just a few fractions of a cent each. Shkumbin Hamiti, the head of Nokia's network API business unit, suggested at a MWC Barcelona media event that some advanced networking APIs – like those that would identify uncongested network connections among various providers for drone flights – might cost $300 each.

Caution and optimism

So what's the takeaway from all this? Do network APIs represent a clear path to 5G riches? Or are they yet another doomed attempt by the industry to stimulate interest in a shrinking market?

There are smart people on both sides of the debate. Naturally, executives at vendors and network operators offered a mostly optimistic view. During MWC Barcelona, Deutsche Telekom executive Peter Arbitter said network APIs will help make sure that telecom companies like DT won't become commodities, like utility companies are.

But others are more cautious.

"Network APIs are not some kind of magical ticket to revenue growth nirvana. APIs are simply how software programs communicate with one another," Rakuten's Geoff Hollingworth explained on LinkedIn. He argued that some APIs – such as ones to combat fraud – would generate demand. But he said others, like those designed to disclose network quality, "will not appear with any scale."

Others took a similar dim view. 

"Using history again as a guide, initiatives such as these are unlikely to gain critical mass due to competitive, cultural and resourcing reasons," wrote TBR analyst Chris Antlitz. He pointed to AT&T's ONAP platform and Deutsche Telekom's MobiledgeX as examples. Both failed to garner momentum, with AT&T eventually selling ONAP to Microsoft and DT offloading MobiledgeX to Google. "The last major telco-led initiative to gain broad, global traction and yield significant benefits across the industry was the SMS initiative over 20 years ago," Antlitz added.

A deeper debate though focuses on which companies might profit from whatever traction network APIs manage to generate. 

"As things now stand, we anticipate that mobile operators will follow one of two trajectories. In the first, there will be limited API uptake and a status quo, where CSPs [communication service providers] conduct the same type of economic activity they're pursuing now, such as continuing to move more and more data and acting as a 'dumb pipe,'" wrote the analysts at Kearney. "In the second, there will be mass standardization and aggregation of APIs via third-party channels to support active API development, but it will most likely be led by just a few large third-party aggregators."

Others agreed that third-party API aggregators will be the ones to squeeze value from the API marketplace. Primary among those aggregators will probably be hyperscale players like AWS, Microsoft and Google. After all, they already court hundreds of thousands of cloud computing developers.

"Most CSPs are likely to remain technology consumers instead of technology producers, keeping them confined to connectivity providers and dependent on the vendor community and other players like hyperscalers for innovation," wrote Antlitz, the TBR analyst.

Regardless, some are staying hopeful. Ormston, the AT&T executive, believes that network APIs will lead to the development of new services and applications that no one has ever seen before. A rising tide raises all boats.

"It opens up a lot of different business models," she said.