VanillaPlus managing editor George Malim went to DTW Ignite 24 in Copenhagen last month and came home with a new clarity regarding communications service providers’ prospects for monetising B2B2X models via marketplaces, API exposure and the judicious application of AI
Communication service providers (CSPs) are in trouble. They’re faced with the never-ending need to invest in the next generation of mobile infrastructure while everyone else involved in the mobile value chain gorges on the lion’s share of the revenue. Failed attempts to drive new revenues from content, retail and games to name just a few, have resulted in monthly mobile subscriptions generating revenue that in some markets barely buys a frothy coffee.
That won’t pay for completion of 5G, let alone 6G and future network infrastructure so a rethink has been underway for several years. It’s clear that CSPs aren’t natural resellers or content creators and it’s hard to see how mobile average revenue per user (ARPU) can be radically increased without clear and significant added value being delivered to consumers. There are some outlying examples in which this happens, such as low latency gamers in advanced markets such as South Korea paying a premium for services but the reality is that the mobile market won’t get by on 50 cent scraps it receives for supporting a turbo-boost button for gaming or videoconferencing.
CSPs need more than 50 cent scraps
This means the enterprise market is where the revenue uplift must originate. There’s a real opportunity across multiple vertical markets. One example mentioned by Michal Harris, the senior vice president of global marketing at Beyond Now, at the recent DTW Ignite 24 show in Copenhagen, was the agriculture industry. Services such as connected soil analysis probes could allow farmers to make massive efficiency gains in how they use fertiliser and the expense of the service is readily outweighed by the yield gains and cost savings.
There are numerous examples across all industries that are similar to this but the mistake the telecoms industry has made in the past was in trying to become vertical market experts. This takes too much time, often fails to meet the specific needs of a vertical and distracts from the CSP’s core business. CSPs shouldn’t become agribusiness experts, they should support agriculture businesses in their use of technology and derive additional revenue from that.
“The number one problem CSPs have is growth,” confirms Harris. “If you ask a B2B customer what they need it’s never just connectivity, so you need partners and the challenge becomes how to make it more operational and build a mechanism for partnering.”
We’re all in the marketplace now
That mechanism ideally should take the form of a marketplace in which CSPs can sell their capabilities alongside those of other organisations, which might include services such as billing and fraud prevention alongside network offerings. In the agriculture scenario, the specialist vendor can go to the marketplace and simply buy what it needs from the CSP to connect its service and enable adjacent services in support of it.
“Marketplaces are a must for the telecoms industry to continue,” adds Harris. “What are the roadblocks and what is stopping operators from doing this? The telco thinks they have an ecosystem but it’s a handful of vendors usually with big companies who can handle a long process.”
CSPs have recognised the need for change and are engaging in the move to marketplaces. “We decided to build a commerce platform which we’ve launched and commercialised,” says Kevin Lee, the chief digital officer for consumer at BT Group. “We’re not selling anything perishable but anything that requires a connection we believe we can sell. What if there’s a third actor like Vodafone customers or travellers? We need to build an identity platform that allows the customer to sign up and enjoy the offerings.”
“The commerce platform is the easy challenge and the most difficult is the identity platform which is detached from the rest of CRM so we have that need to integrate with third parties wherever the customer is waiting for us to take them,” he adds. “With both the platform and APIs we have to go where the customers are. We have the right to play here.”
CSPs need to support marketplaces at hyperscaler speeds
Harris cites one customer taking more than a year to reach a signed agreement after the first offering of the partnership was confirmed and that simply won’t work for the B2B2X models that are coming to marketplaces now.
“It’s a different way of thinking,” she confirms. “It’s different in the diversity of skills and capabilities required. You need partners for security, IoT and verticals such as agriculture. Where you used to work with a handful of companies you need to work with hundreds or thousands and it’s no longer a linear partnership composed of the vendor, the CSP and the reseller. It’s a much more dynamic marketplace where you sell complete solutions, you don’t just resell connectivity and Microsoft 365.”
To deliver that dynamism, CSPs need to make their application programme interfaces (APIs) available to third parties so they can assemble appealing services to enterprises. Doing so until recently was greeted with shouts of paranoia that the unique value of the CSP would be given away through API exposure but CSP confidence in exposing at least some APIs is growing. Models and marketplaces for monetising APIs are now in place and new businesses are being built around freshly exposed capabilities.
Exposed APIs can protect CSP profits
“The attraction started with the realisation that mobile broadband back-end traffic alone wouldn’t help transform the industry – another revenue stream would be needed,” explains Joakim Sorelius, the head of Ericsson Global Network Platform, Product and Engineering. “That’s where the market in network APIs and network exposure started from.”
“We have an exposure portfolio but it’s not enough to just offer that to CSPs,” he adds. “Two aspects have changed; one is the aggregation to provide the same type of API in the same region. Open Gateway and GSMA have done a great job here. The second aspect is the developer community and identifying what makes sense to expose.”
With February 2024’s announcement that ClearX’s API exposure service is letting developers access communications and network APIs from the Google Cloud Marketplace, the long-promised idea that the future salvation of CSPs could be achieved by opening up APIs via marketplaces took a significant step forward. The thinking is straightforward: if CSPs expose their APIs to developers via a marketplace they can monetise them and transform profitability, making sense of continued investment in network infrastructure. By exposing APIs to organisations outside telecoms, new services can be created and new revenues earned.
Greater commitment needed
CSPs are cautious of running before they can walk into this new era. There’s a fear that enabling access to too many APIs may be a threat rather than an opportunity but it’s not realistic to be half-pregnant. Tightly controlling exposure of a handful of identity or network-related APIs doesn’t allow other organisations to innovate and create the volume of new services fuelled by CSP capabilities that is needed. As a consequence, the pace is being set by others.
“ClearX and Google Cloud announced the first marketplace on Google Cloud for GSMA Open Gateway APIs and until then, CAMARA APIs had been exposed by CSPs to enterprise customers but not through marketplaces,” says Andy Tiller, the executive vice president for member products and services at TM Forum. “This takes Open Gateway to another level and we’re seeing developers create products using TM Forum Operator APIs. The services include classic exposed API offerings such as identity services that use CSP data to identify and audit clients.”
Sorelius sees a growing portfolio of revenue generating services that CSPs will benefit from. “The opportunities are in fraud prevention, quality on demand and aggregation of general device information. These are the right APIs and I’d estimate that 90% of the addressable market is in fraud and identity today. There’s a lot of value in that space and SMS is not a good user experience.”
A question of quality
“In quality on demand, the simple use cases offer the biggest returns,” he says. “Point of sale (POS) devices are a large opportunity and it can be built into the service level agreement of the application that there is a quality [network] slice that supports the small moment of network usage that a transaction demands. Videoconferencing comes in as well, especially for targeted apps like telehealth. It’s not a consumer play.”
Tiller agrees: “Probably more exciting is quality-on-demand and the technology is all here to enable that. If you’re a cloud gaming company and you want to give a boost button to a customer on a network anywhere in the world, you can and also charge a fee for ten boost button uses per month. That’s a new business model that is exciting and Open Gateway has got a lot further than previous initiatives.”
The application of AI
Let’s not forget that ten, a multiple of 50 cent boosts a month is closing in on the cost of that cup of coffee and represents a near doubling of ARPU from some subscribers. Even so, identity and boost buttons only scratch the surface of the opportunity, which Tiller acknowledges. “Obviously there’s more general interest in B2B2X models in which the CSP can be the first or the second B,” he explains. “If we use AI to automate customised services and charge for them, we can create new revenue opportunities.”
Those opportunities extend across the CSP estate and take in capabilities such as billing and charging alongside identity and customer data. AI will have a growing role to play in identifying and defining how services are delivered as well as to ensure the smooth automation of processes in support of marketplaces and services enabled via exposed APIs.
“What we’re really trying to do as AI takes root is to identify what use cases are most relevant for the data that we sit on,” says Chad Dunavant, the executive vice president and chief product and strategy officer at CSG. “We’ve ingested invoice data that we have into large language models and assessed how we can use GenAI to meet the consumer expectation of getting relevant information from the operator. We also see AI tools plugging into the catalogue to provide personalisation.”
For Lee at BT Group, AI has yet to prove its worth and further work is needed. “We’re working hard to bring the benefits of AI but the revenue model isn’t there and there is progressive cost to consider as well,” he says.
That’s partly due to understandable, long-term concerns among CSPs that exposing their APIs gives competitors the keys to their kingdom. The addition of AI only adds to the perceived loss of control. CSPs have been burned before in their attempts to enter new markets and they don’t want to see a combination of AI and Open APIs benefitting partners unless they also benefit fairly.
“Operators are very concerned about the customer relationship and want to protect the relationships they have but they can include network APIs into offerings to customers,” Sorelius contends. “Right now, the market is forming and there are several different partnerships and platforms for APIs but what we’re trying to do country-by-country is unlock APIs market-by-market. It will take authentication and we are trying to address markets in terms of value first . It’s clear everyone sees the opportunity. It makes sense but it’s currently a bit of a chicken and egg situation.”
George Malim, the managing editor at VanillaPlus
Comment on this article via X: @IoTNow_ and visit our homepage IoT Now
