Niklas Heuveldop, the man now in charge of Ericsson's big push on network APIs, wants to talk about "sentient bondage." Reading those two words in the interview transcript triggered an expectoration of coffee over the laptop screen and a switch from Otter.ai's record to the original audio. "Sinch and Vonage" were his actual words, misinterpreted by the software program. It serves, of course, as a small warning about the dangers of overreliance on nascent artificial intelligence (AI). Yet sentient bondage seems curiously fitting.

That's because it is hard to escape a sense the telecom industry – or, at least, a vast swathe of it – has become a slave to the mission of extracting value from network APIs, the application programming interfaces that could join software developers and 5G networks in a happy and lucrative partnership. Ericsson's pursuit of that was the justification for the biggest takeover in its history, a $6.2 billion acquisition of Vonage, a US software developer with API smarts, back in July 2022. But it has not gone as swimmingly as Ericsson would have hoped.

Since completion of the deal, Ericsson has taken impairment charges of about $4 billion against the Vonage business, prompting one equity analyst to accuse it of "value destruction" on the company's last earnings call. Have patience, is the broad message from Ericsson. Those charges relate to a deterioration in the markets where Vonage has traditionally competed, not network APIs. But this all puts Heuveldop under huge pressure. Revenues earned by telcos and their suppliers have stagnated. Many hope that Heuveldop and the people around him in network APIs hold the answer.

He is fully aware of that and seems to relish the challenge. "We feel the pressure, make no mistake," he told Light Reading on a video link from the US. "I gave up a good job because I think this is a once-in-a-lifetime opportunity to bring the different parts together, and I'll do my best to mobilize our capabilities."

One aggregator to rule them all

Heuveldop clearly has the management experience, industry contacts and track record for it. Having spent almost 19 years in roles at Ericsson, he was previously CEO of the Swedish vendor's entire North American business before he took the Vonage job in February this year. Just a few months earlier, he was instrumental in securing a $14 billion radio access network deal with AT&T, the biggest customer contract Ericsson has ever signed. And AT&T figures prominently in what Heuveldop has already been able to achieve as head of Vonage and Ericsson's related global communications platform business.

Two weeks ago, the US operator and 11 of the planet's other Tier 1 telcos joined forces with Ericsson in a venture that gives the Swedish vendor a 50% stake and splits the other 50% among the participating operators. It could – if all goes to plan – provide the spur the industry so evidently needs.

The industry's mission, in a nutshell, is to standardize the APIs between applications and networks. Just as developers can write code for today's Android operating system and see it launched to millions of smartphone customers, so too would they be able to produce software for multiple networks serving millions of people.

Ericsson and others see these APIs as the doorways to valuable network features. But they will look far less valuable to any developer if each telco comes with its own unique set of APIs. Attempts have already been made to address this fragmentation. Initiatives include Open Gateway, effectively a rousing call to arms by the GSMA, a lobby group for telcos, and the more important CAMARA Project. Under the auspices of the open-source and nonprofit Linux Foundation, its job is to do the actual API harmonization.

But neither has completely solved the problem, according to Heuveldop. "It didn't address another underlying flaw in the industry structure – that there are a lot of different aggregators today and we kind of operate in a layered way," he said, naming Sinch and Vonage (not sentient bondage) as two of those players. All this has resulted in "margin stacking" and complexity that will impede further development, he believes.

The new venture, then, is essentially positioned as the center of gravity in this solar system of orbiting aggregators, developers and telcos. "This new entity is intended to be the go-to place, the preferred marketplace, for the big developer platforms," said Heuveldop. "Vonage is a customer. So is Google. And hopefully others that we're talking to will also embrace this as a good marketplace to access global APIs, harmonized across carriers worldwide. And that, I think, is the missing piece."

For anyone inclined to be skeptical, perhaps the main concern is that the new venture will struggle to play this role of a sun for the planets. On the plus side, it has lured operators that account for many millions of the world's phone users (the full list comprises América Móvil, AT&T, Bharti Airtel, Deutsche Telekom, Orange, Reliance Jio, Singtel, Telefónica, Telstra, T-Mobile, Verizon and Vodafone). Google is a key aggregator customer with its huge community of more than 10 million developers. But others are missing.

Awkwardly, for Ericsson, one of the notable absentees is big rival Nokia. Indirectly, it is involved simply because some of the 12 telco members buy infrastructure from the Finnish vendor, including the service exposure capabilities that feed APIs to aggregators. There is nothing to prevent it from becoming a customer, like Google, and consuming APIs on FRAND (that's fair, reasonable and non-discriminatory) terms, said Heuveldop. But there is a good chance Nokia does something completely different.

"I think today they are positioned as an alternative aggregation platform as well," said Heuveldop, clearly alert to all the possibilities. "And I guess the jury's out if they want to try to build a competing platform or if they join forces with us and use this as the go-to market vehicle for APIs, including their own APIs."

Layer cakes and orbiting bodies

Nokia as a customer is not as inconceivable as it might sound. The new joint venture is not strictly a nonprofit, but neither is it set up to "maximize profits," as Heuveldop puts it. Hence the reference he makes to the same FRAND principles used for the licensing of intellectual property in standard-essential patents. This might help mitigate any concern Nokia has about enriching its biggest competitor. Where, though, does the real money come from? Rolling the network APIs part of Vonage into a venture that does little more than wash its face seems like another way to upset investors already angry about the $4 billion in impairment charges.

To clear up any confusion, only a specific bit of the network APIs part of Vonage has been wrapped into the joint venture, Heuveldop makes clear. "The one thing we have decided to break out and spin into this joint venture is the aggregation platform that will then service Vonage and others, and that was the only way to solve that problem," he said. "If we had kept that tightly integrated with Vonage, I would not be a credible partner to other developer platforms."

The interrelationship of the different platforms and orbiting bodies (a metaphor Light Reading is sticking with) is hard to visualize, perhaps even harder after the joint venture's creation. But James Crawshaw, a principal analyst with Omdia (a Light Reading sister company) makes good sense of it in a graphic for his latest report on network APIs, presciently published days before Ericsson announced its new venture.

Reproduced below, it shows multiple layers between the application developers at the very top and the telcos (via the core network) at the bottom. What Heuveldop calls the aggregation platform is colored purple and referred to as "Operator Platform." As shown, it has a central role in the ecosystem as the place where aggregators and telcos meet. This is far more efficient, explained Crawshaw, than having each telco interact with each developer-facing aggregator – the likes of Vonage, Google and, dare it be said, Nokia.

(Source: Omdia)

From Ericsson's perspective, then, Vonage is still the main breadwinner. "Vonage is very much where we expect to monetize this new profit pool by then building great applications for our developers on top of the APIs we will source from this new entity," said Heuveldop. The job of Vonage and other aggregators is essentially to take those API ingredients and make them more palatable for a developer. Even the most sophisticated developers "will struggle to make sense of a raw API," said Heuveldop. What Vonage does is allow them "to program networks without even knowing there is a network," he added. "The developer simply drags and drops some code – et voila."

Moving the needle

Based on numerous analyst reports, Heuveldop puts the value of this market for API transactions at between $8 billion and $30 billion over a five-year period. That's exciting for a company like Vonage, which made revenues for Ericsson of about $1.6 billion last year, but hardly a "needle mover" for the world's telcos, he concedes. The much bigger opportunity is what these APIs could unlock in connectivity and other revenues.

Some huge numbers have been floated, including a notable $300 billion figure produced by management consulting firm McKinsey & Company. Most exciting to Heuveldop and others in the 5G business is the idea that a "quality-on-demand" API could provision a discrete slice of the network for a specific use or user.

Singtel, an Ericsson customer, offered a glimpse of this two years ago when it was able to charge a premium at the Singapore Grand Prix for service guarantees unavailable to other subscribers, including faster downloads. "We're dreaming about doing this dynamically at scale, but the static examples that we have seen give us cause for optimism that there is real value recognized by consumers," said Heuveldop.

There is, though, no shortage of skepticism, and Heuveldop freely admits that quality on demand is still in its early days. "Developers don't have access to that yet," he said. "That API is still in its infancy." The traction so far has been in areas like fraud prevention, where network APIs seem to offer much stronger protections than older tools such as two-factor authentication.

In the absence of other ideas for monetizing 5G and reinvigorating the telecom sector, which is after all a critical industry, Ericsson can hardly be criticized for its efforts, even if those have yet to bear much fruit. And for all the naysayers, anyone who earns a living in telecom surely wants the network APIs mission to succeed, however that happens. The new joint venture could be an important step in the right direction. The quicker it can advance, the better.