APIs: a clear commercial return?

31 March 2014 | Guy Matthews

Carriers have been exploring the ins and outs of opening their programming interfaces to outside developers, such as OTTs. Capacity considers the upside of making APIs accessible.

The exposure of a business’s application programming interfaces (APIs) to external partners in order to facilitate collaboration and stimulate new revenue is a well-tested model in certain vertical sectors, like pharmaceuticals and retail.

The practice is far from unknown in telecoms, but it still lies outside the comfort zone of the traditionally minded end of the sector, as to them it smacks too vividly of putting prized family jewels on public view.

Those operators that favour open APIs believe that it increases their competitiveness, fosters creativity and attracts new classes of customer, all while leveraging existing network investment in innovative ways. From the start, their hope was also that it would help transform over-the-top (OTT) service providers from rent-free tenants into partners with a shared commercial interest.

It is not a move than any carrier makes lightheartedly, however. Opening APIs takes a huge amount of investment and internal work. It involves radically changing culture and practices, not something that is natural or comfortable for most telcos. But the perceived end prize has driven many to take that step.

“Carriers opening up network APIs to OTT players is a potential win-win-win situation for customers, operators and OTTs alike,” says Dave Peters, CEO of Emagine, a provider of software and services for MNOs.

“OTT players stand to benefit from unique operator characteristics that only the largest names in their field could otherwise hope to achieve. These include a trusted brand, robust customer management systems and processes, billing, fraud and credit management, and a deep understanding of their customers,” he adds.

What OTT players offer operators in the other direction, he believes, is unbridled creativity, rapid cycles of development and the ability to cater to a mass of niches. Thousands of apps can be produced in short order for many different customer segments.

Leading the pack
So which Tier-1 carriers lead the way in the transparency of their API assets? Telefónica Digital is a leading example, having announced its BlueVia developer programme back in 2010. The radical aspect of BlueVia was that it charged application developers nothing to get at the heart of a range of APIs, covering areas like billing, user profiling and the analysis of customer usage patterns – unprecedentedly intimate stuff.

Successful applications that ended up selling through Telefónica’s online app store would generate income split between both players. Third parties that have collaborated with Telefónica through BlueVia include Facebook, Google and Microsoft, as well as a host of much smaller names.

BlueVia took another direction in 2012, when Norwegian telco Telenor became the first carrier partner to join the API scheme. By contributing its own APIs to the mix, Telenor extended BlueVia’s power in a number of ways, giving developers a shot at a base of well over 400,000 subscribers, plus better geographic reach. Telenor is not just big news in the Nordics, but in other places in Europe where Telefónica has weak penetration, as well as Asia and even Russia, thanks to its share in VimpelCom.

Other multi-carrier API experiments have proved less successful. The Wholesale Applications Community (WAC) had the vision of allowing dozens of operators and developers to play together in a nurturing ecosystem, but in truth there was little unity of vision between participants and the idea quickly folded.

Some attempts have fared better, albeit not on the same scale. In 2012, France’s big three mobile operators – Orange, SFR and Bouygues Telecom – got together with vendor Alcatel-Lucent to launch YouConnect, a platform for developers to create new ways to reach out to subscribers.

Orange has also been busy on its own account. Xavier Perret, VP strategic partnerships with Orange, says the telco redesigned its Orange Partner website in 2013 specifically to expose its APIs more freely and easily.

“Now any partner can go and get them,” he explains. “Why is this important? We recognise that we are not the only people who can innovate, and that opening up APIs allows a lot of added value that makes for happier customers and a better user experience.”

OTTs, he believes, need operators to survive, but also need more tangible ways of getting closer to them.

“APIs are a great way for OTTs to get value from a network,” he adds. “At the moment this is creating some value directly for both camps, in other words revenue. But a lot of the value is indirect. Truly direct revenue from sharing APIs may be a long-term play. The fact is that the money we spent opening APIs we could have spent developing new services of our own – but others can perhaps develop them faster and more efficiently.”

APIs and the cloud
Other big European telco names have not wished to be outdone. TI Sparkle is another pioneer, and Deutsche Telekom has its own cloud-based development ecosystem called Developer Garden. The carrier is promoting it to third parties as the perfect way to create solutions in areas like dynamic quality of service, authentication and authorisation, carrier billing and messaging. Developer Garden has been adopted by IBM, among others, which makes it available to users of its own mobile application development platform so they can get to Deutsche Telekom’s APIs.

“The collaboration between IBM and Deutsche Telekom Developer Garden enables us to offer new business models in the area of mobile app development and to unlock new value for our customers,” says Rainer Deutschmann, SVP, core telco products at Deutsche Telekom. The move, he says, allows IBM to fight back against disruptive “mobile platform as a service” players, like Kony and Appcelerator.

On the other side of the Atlantic, AT&T has enjoyed success with its API platform, which runs on the Apigee Enterprise API management service. In this way, AT&T says it has a rapid deployment method for value-added mobile applications in areas like messaging and billing.

Like Orange, it recognises that its own power to innovate at application level, whilst scarcely negligible, is easily outdone through the simple step of giving that ability to others. Saving itself the effort of building its own capabilities in vertically integrated product lines, it is instead getting third parties to develop existing code horizontally across a range of product areas.

The sharing of APIs by carriers is not just a play for consumers. Matthew Finnie, CTO of European operator Interoute, explains that through the company’s Virtual Data Centre it has opened its APIs to a range of organisations, including the European Space Agency.

“The benefit is that in the past people would buy data centre and network capacity and build a solution,” he says. “Now with ‘everything as a service’ they can achieve a granularity through APIs they could not afford in other ways. We’ve created a language for anyone to build services on Interoute. We’re asset-heavy, and the more people can consume what we do without talking to us the better. Exposure at programmatic level is a much more efficient way of buying and selling.”

It is also an area where vendors have a say, as noted earlier with Alcatel-Lucent and YouConnect. Swedish equipment maker Ericsson was even earlier to the API game, working with Wind in Italy back in 2000.

“We called it ‘service exposure’,” explains Claes Cegrell, head of portfolio, OSS and service enablement with Ericsson. “The market has changed a lot, though. Where we now need to go is operators co-operating to standardise the opening of APIs. Standardisation of APIs has not worked out yet – that’s maybe a long-tail market. At the moment, operators cannot even agree what APIs to expose. They must open up more, while retaining control and flexibility.”

Persistence is key
Naturally enough, carriers may be reluctant to extend their experiments in open APIs any further than they already have done, unless there is a clearer commercial return.

Caroline Chappell, senior analyst at Heavy Reading, says many have failed to enjoy the supercharged profitability they envisaged when they set out – or at least they have not seen it so far.

“Is there much money in opening APIs?” she queries. “If you look at Apple, they’ve made something from it, but it is pocket money compared to what they get from selling iPhones. Carriers have found they’ve achieved a degree of stickiness and loyalty, but not the easy revenue stream they’d hoped for. They’ve realised in particular that opening up to OTTs is not going to fly like they’d planned.”

She believes carriers will persist for diverse other reasons, such as perception and loyalty. Looking further ahead, she thinks they may find that the real value of APIs is not in the cool consumer space, but among enterprises, generating applications for M2M, asset tracking and enterprise voice.

“Although the crucible of API exposure to date has probably been the developed markets of western Europe and North America, the model may have a different future in other parts of the world,” she says. “In the Middle East you can’t easily get an account with an Apple or a Google as a developer, not like you can in the west. Telcos there are finding they have an important role as a hub for developers. I’m seeing people like STC and Etisalat turning up at conferences with success stories in areas like payment.”

Indeed, it is easy to see why creative ways to help consumers pay for things might be useful in markets where people are under-banked and do not own credit cards. TI Sparkle and Telefónica have spent heavily on trying to turn their respective home markets into paradises for developers – but it could be that the secret to API success lies, for them, in Latin America, where they enjoy so much power and freedom to innovate, and where product-starved consumers may be more amenable to the freewheeling creative spirit that open APIs represent.