Network APIs offer telcos a chance to finally generate sizable returns on their massive 5G investments, but doing so will require changing some of their traditional ways of doing business.
Although telcos invested nearly $1 trillion in network upgrades since 2018, they are still struggling to monetize 5G. This ongoing challenge has troubling echoes of other recent missed opportunities. The sector is now at risk of losing out on the chance to extract significant value from 5G’s unique capabilities, much as it has missed the opportunity from streaming video and enterprise messaging over the past 20 years, which left other players profiting from the sophisticated, costly digital infrastructure that telecom operators put in place.
However, there is growing interest—and hope—in the potential of network application programming interfaces (APIs) to turn the tide. Network APIs are the interlocking puzzle pieces that connect applications to one another and to telecom networks. As such, they are critical to companies seamlessly tapping into 5G’s powerful capabilities for hundreds of potential use cases, such as credit card fraud prevention, glitch-free videoconferencing, metaverse interactions, and entertainment. If developers have access to the right network APIs, enterprises can create 5G-driven applications that leverage features like speed on demand, low-latency connections, speed tiering, and edge compute discovery.
In addition to enhancing today’s use cases, network APIs can lay the foundation for entirely new ones. Remotely operated equipment, semi-autonomous vehicles in production environments, augmented reality gaming, and other use cases could create substantial value in a broad range of industries. By enabling these innovations, telecom operators can position themselves as essential partners to enterprises seeking to accelerate their digital transformations.
Over the next five to seven years, we estimate the network API market could unlock around $100 billion to $300 billion in connectivity- and edge-computing-related revenue for operators (exhibit) while generating an additional $10 billion to $30 billion from APIs themselves. But telcos won’t be the only ones vying for this lucrative pool. In fact, with the market structure currently in place, they would cede as much as two-thirds of the value creation to other players in the ecosystem, such as cloud providers and API aggregators—repeating the industry’s frustrating experience of the past two decades.
Reaching the upper end of our market prediction will almost certainly require telcos to reconsider many of their traditional ways of doing business. Most significantly, they will likely need to collaborate with one another and with players across the value chain—including vendors, systems integrators, and enterprise developers—in order to create a robust supply of fully interoperable APIs, generate demand by illustrating their value, and develop new market structures that maximize telcos’ role. Early collaboration among the world’s more than 500 telcos will be critical. Unless operators quickly align on common standards for creating APIs that work seamlessly across global networks, they are unlikely to gain traction among enterprise developers.
This article presents a road map that telcos could follow to capture value from network APIs. If operators of all sizes move now, they have a chance to seize the network API opportunity. A delay could force many to cede this fruitful territory to a handful of their largest competitors and to players in other industries, who might leverage other technologies—predictive AI for gaming, low Earth orbit (LEO) satellites for guaranteed connectivity, and over-the-top solutions for data and edge computing discovery—to deliver the results that customers demand.
While telcos have yet to entice businesses and consumers to pay more for 5G connectivity, an emerging body of evidence suggests that both enterprise and B2C customers are, in fact, willing to pay to enhance the use cases that are important to them. Put another way, customers see value in experiences rather than in connectivity per se.
Network APIs allow for the creation of subscriptions, services, and applications that move the 5G value proposition away from the abstract concept of enhanced connectivity and toward the relevant, real-world experiences that customers desire.
Still, when it comes to network APIs, the telco industry has a classic chicken-and-egg dilemma. 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.
The measures that follow have the potential to unlock 5G monetization and place the telco industry at the center of next-generation solutions. They involve building and nurturing the nascent network API market by generating both supply and demand. Once supply and demand are in place, telcos can begin shaping ecosystems and market structures that could allow them to maximize their share of the value network APIs can deliver.
Last year, a major telco approached a large gaming company with an API that could give gamers instant access to best-in-class connectivity—as long as those gamers were affiliated with that carrier. The gaming company declined. Its leaders explained that they didn’t want to invest in creating and marketing an offering that would be relevant for only 20 to 30 percent of gamers.
For the telco, it was a stark lesson in the primacy of interoperability. While there are limitless opportunities for improving customer experience through network APIs, developers and enterprises prize scalability. And interoperability is critical for scaling. Without an array of network APIs and the certainty that they will function across networks and geographic regions, enterprises are unlikely to invest in this area.
Early efforts to foster collaboration across the global telecom industry are gaining momentum, albeit relatively slowly. In the most notable example, GSMA, a mobile ecosystem industry association, has teamed up with the Linux Foundation, a nonprofit devoted to open-source software, to create CAMARA, an open-source project focused on developing a set of standardized network APIs. CAMARA creates common definitions for APIs so developers can use a single piece of code to access 5G capabilities across networks. 2 “Linux Foundation announces new project ‘CAMARA—The Telco Global API Alliance’ with global industry ecosystem,” GSMA, February 28, 2022.
GSMA has also set up a parallel initiative, Open Gateway, to identify the most marketable APIs and encourage telcos to introduce them using CAMARA’s standards. 3 “Mobile industry deploys open network APIs and prepares for new era of digital services and mobile apps,” GSMA, February 27, 2023. Open Gateway is inspired by the SWIFT payment system, the secure communications network for fund transfers that was developed by 239 banks across 15 countries and is now used in most high-value transactions worldwide.
Although limited in reach and scale, early use cases stemming from the Open Gateway initiative are already happening. In November, three Brazilian operators—Claro, TIM Brasil, and Vivo (Telefônica Brasil)—announced a joint effort to launch three CAMARA APIs to improve digital security. The operators are partnering with Infobip as a technical integrator and Microsoft Azure as a services platform provider. 4 “Brazilian mobile industry launches three anti-fraud network services and becomes pioneer for GSMA Open Gateway,” GSMA, December 11, 2023.
However, while more than 40 of the world’s leading carriers have agreed to adopt CAMARA’s API standards, few have made CAMARA APIs available for developers to use commercially. Among the reasons for this reluctance are operators’ wariness of investing in a fledgling market and uncertainty about the business model. Additionally, operators with superior networks may fear that their competitive advantage could be eroded, since the lowest performers in each market will likely end up setting the standard for key features such as speed and latency.
The most successful example of telco collaboration on this scale resulted in international mobile roaming capabilities. Though most people take it for granted now, the ability to make calls in every country, from and to every network, requires sizable and sophisticated orchestration. Roaming, backed up by bilateral contracts between operators and operator consortia, has truly created a global capability for users, with limited to no friction.
The industry can also look to its own past for a striking cautionary tale of how the failure to collaborate can squelch substantial opportunities. When WhatsApp was introduced in 2009, telcos were charging customers as much as 20 cents for each text message they sent. Telcos could have created a product allowing people to use the internet for free to send text messages, photos, and videos. But they were reluctant to relinquish lucrative texting revenues and were slow to align on common standards to ensure interoperability. By the time they had come to an agreement, most of the messaging volume had already shifted to WhatsApp (now estimated to be worth $50 billion to $100 billion, 5 Thomas Lott, “Examining Meta platforms on the sum of parts basis,” Seeking Alpha, September 29, 2023. if not more) and iMessage.
Some carriers are taking a different approach by introducing CAMARA APIs on their own networks. In September, Deutsche Telekom and Vonage launched MagentaBusiness APIs, a platform allowing developers and businesses to build apps and services using CAMARA APIs that tap into Deutsche Telekom’s network. 6 “Telekom commercially launches network APIs,” Deutsche Telekom, September 20, 2023. This approach doesn’t bring about the necessary interoperability, but it allows developers to experiment with CAMARA APIs in live networks.
Even if telcos agree on the principle of having common API standards, they may disagree about how to define specific APIs’ performance levels (for example, five- versus seven-millisecond latency). Pricing could also generate debate; it’s much easier for users to offer global services that are uniformly priced. Countries’ differing regulations on data consent requirements could be another complication. However, if operators leverage initiatives like Open Gateway to reach agreement on a set of harmonized APIs, they can differentiate themselves by creating innovative solutions.
To gain traction with enterprise developers and offer the scalability they prize, telcos can align on an industry-wide timeline detailing which APIs they will release first, in what order, in which geographical regions, and exactly when. Alliances like GSMA’s Open Gateway initiative can play a role in bringing telco leaders together to determine which APIs to prioritize and establish a clear timeline for rolling them out.
Before telcos begin substantive discussions, they may want to establish clear decision-making protocols, as they will inevitably encounter sticking points while working toward a coordinated road map. For example, telcos might have different strategic priorities based on the needs of their current customers, the strengths of their partner ecosystems, or their systems’ abilities to support certain APIs without costly upgrades.
Telcos may also want to lean into the APIs that emphasize their existing competitive advantages. For instance, those that have invested heavily in 5G stand-alone (SA) core may want to focus on APIs that only sophisticated networks can enable, like the one for quality on demand. Those without SA core will likely prioritize simpler APIs, such as location verification, number verification, and SIM swap (which checks whether a phone number has recently changed SIM cards before approving transactions made with that number). Finally, telcos may have vastly different estimates of each API’s market potential and likelihood to boost connectivity revenues. This divide could be eased by jointly investing in market research that gets everyone on the same page and continues to track the market’s evolution.
As telcos work together to overcome any obstacles and agree on priorities, they can benefit by weighing the following considerations: