Under-used network APIs hamper revenue potential
Most of the world’s communication service providers (CSPs) are missing out on the potential financial benefits offered by network application program interfaces (APIs), a senior manager with Oracle Communications claims.
John Muhlner, director of SDP product marketing at Oracle, told Telecom Asia CSPs are largely failing to use network assets to tap the revenues being generated by new mobile services and applications, and are unable to address new business sectors in the process.
The telco service exposure addressable market will be worth $115 billion per year by 2015, estimates Alan Quayle, Oracle’s business and service development chief. However, this figure is only a third of the forecast made in 2005 because of sluggish carrier uptake.
Muhlner says, however, it’s not too late for service providers to jump on the API exposure bandwagon.
“Network APIs deliver value not only to long-tail developers, but also to the short- and mid-tail content partners, MVNOs, enterprises and even internal developers,” he notes, adding that service providers that use their network assets fully can offer unique capabilities that ease current frictions in using apps. Leveraging existing app developer programs or by creating new partner programs, telcos can provide API support for a multitude of services including subscriber location, charging, messaging, call control, quality of service, identity management and profile exposure, he points out.
Many of these services are highly differentiated as over-the-top providers aren’t capable of offering them, Muhlner says. “For example, if a user or an enterprise wants to access the location of a family member or an employee as part of an application they are using, the service provider has the ability to provide this information.”
In addition, existing billing systems can be used to derive revenue from in-app payments, an approach that benefits CSPs and content partners alike. “It extends out for physical goods,” Muhlner says, noting that there is a “substantial non-digital market” that CSPs can also address.
Other applications for APIs include automatic population of regular profile information – data that users often have to fill in each time they register for a new service -- privacy management, machine-to-machine communications, guaranteed quality of service for mobile video delivery, mobile messaging campaigns and targeted advertising.
Unconvinced by OTT success
With so many claims of benefits on the table, you’d be forgiven for wondering why every CSP isn’t already deploying APIs. A recent white paper penned by Quayle states that “operators are, in today’s world, unique in their lack of adoption of APIs for service innovation,” despite the success of the interfaces being proven by OTT service providers. Netflix handled some 28 billion API calls in January while Facebook generated 19 billion per day in December and Google had 11 billion per day in February. In each of these cases, exposing their APIs significantly extended their reach enabling them to grow rapidly.
CSPs’ reluctance is due to several factors, Muhlner explains. The most significant is that those service providers that have chased direct relationships with third-party developers – a segment referred to as the long tail – have enjoyed little success. Another consideration is that the operators that have made money are reluctant to tell their rivals how they did it. Thus, the successful business model is proving to be elusive.
Muhlner says long-tail network API deployments “need a strong business model and a whole developer program” to attract enough developers to create an ecosystem capable of rivaling those offered by Apple and Google. These programs also require service providers to engage in some significant market awareness and education to convince developers of the benefits and recruit them to use their APIs to enhance their applications,” he states.
Telefonica’s BlueVia API initiative, which launched in January 2011, is a good example of a CSP addressing the “long-tail” segment. Telefonica tipped the standard developer-pays business model on its head and offers developers a slice of the messaging, advertising and purchasing revenues their applications stimulate. The telco doesn’t require developers to pay for other services like network location and context. The approach allows Telefonica to effectively claim to pay app developers, thereby eliminating the downside risk for developers and enticing more utilization of their network services.
Muhlner says Telefonica’s developer-focused approach is what’s required for service providers to be successful targeting the long-tail. However, paying developers for using APIs is a dramatic shift for CSPs and not a model that has been widely adopted.
New business channels
The flip side of the long tail is the short tail, an approach that sees CSPs strike close partnerships with MVNOs and content partners as well as enables internal developers to use their network services. In the middle of the tail are enterprises. Muhlner says by addressing these segments CSPs open a “whole world” of potential new business.
Several Oracle customers have enjoyed success by addressing these other market segments. For example, Telenor Norway established its Content Provider Access (CPA) system to enable a core set of content partners to leverage its messaging APIs to deliver premium content to its subscribers. Revenue is shared between the parties, and Telenor is generating over $100 million in revenue a year through the program.
Verizon Wireless is another operator working the short- and mid-tail. The telco built its network API gateway using Oracle Communications Services Gatekeeper, which supports controlled access for partners, enterprises and app developers, enabling them to use multiple network services including messaging, location, device management and terminal status.
Verizon’s APIs have been used to enhance call-center applications with location information. For example, automatically routing calls made to a central number to a local point of sales, as well as reducing dispatch mistakes and service call durations by identifying the location of the caller. Other applications include automating time sheets, validating the location of mobile gamblers to meet legal requirements, and even monitoring the location of parolees.
“Enterprises will be more than happy to pay for those network API services,” Muhlner states.
Indian service provider Aircel also uses Oracle Communications Services Gatekeeper to expose APIs. Muhlner says that Aircel realized a rapid return on its investment by exposing its network services to a core set of content partners. These partners use the platform to deliver premium messaging as well as other novel services like charging for audio Facebook status updates resulting in significant revenue generation.
Telecom Italia is another Oracle network API success story. The telco employs Oracle’s Gatekeeper to support a wide range of business models, including number provisioning by MVNOs, partners utilizing location and messaging services, data communication enabling machine-to-machine solutions, and internal messaging services supporting customer care and reducing bill shock. Oracle claims Telecom Italia has been able to greatly simplify partner management that was previously handled via numerous custom interfaces, resulting in the reduction of operating costs of upward of 50% while also opening the door to new revenue streams.
Other carriers enjoying success using Oracle Communications Services Gatekeeper include Korea Telecom, Telkom Indonesia, Australian incumbent Telstra and Vodafone. Muhlner says Oracle is working closely with its customers enabling them to deliver successful API exposure platforms addressing all parts of the “tail.”
Muhlner is confident industry interest in network APIs will continue to grow. Industry initiatives will come and go and CSPs will continue to explore various models, including long tail, short tail, multi-OpCo gateways, and more. In the end, there won’t be just one winner, but multiple successful models enabling CSPs to generate new revenue from the exposure of their network and IT assets.