McKinsey & Company sees network API market potentially generating hundreds of billions in new revenue
Ericsson alongside major global operators, including América Móvil, AT&T, Bharti Airtel, Deutsche Telekom, Orange, Reliance Jio, Singtel, Telefonica, Telstra, T-Mobile, Verizon and Vodafone, today announced an as-yet unnamed joint venture to “combine and sell network Application Programming Interfaces (APIs) on a global scale to spur innovation in digital services.”
The slow drum beat of APIs as a new vector for 5G monetization has been picking up pace for the past two years, notably as the GSMA’s Open Gateway initiative and The Linux Foundation’s CAMARA Project fostered industry-wide standardization of network APIs. Ericsson said in a statement that the new company will follow principles and consensus established via Open Gateway and CAMARA.
Ericsson will hold 50% of the new entity, which will be headquartered in United States, while the remaining stake will be divided up amongst operator members. Network APIs will be peddled to hyperscalers, Communications Platform as a Service (CPaaS) providers, system integrators and independent software vendors (ISVs). Ericsson-owned Vonage and Google Cloud will work with the new company by “providing access to their ecosystems of millions of developers as well as their partners.”
AT&T CtO Jeremy Legg said in a statement, ““At AT&T, we’ve been creating API tools to empower developers for well over a decade. Now, with a broad-based, interoperable API platform, we’re giving innovators a new global toolbox where the world’s best app developers can create exciting user experiences at scale. This high-performance mobile ecosystem will usher in a new era of greater possibility for customers and mobile users around the world.”
Deutsche Telekom’s CEO Tim Höttges said, “The new company accelerates our leading work with MagentaBusiness APIs to expose our network capabilities for customers and developers. We believe that this company will open up new monetization opportunities for the industry. We encourage and look forward to more telecom operators joining us to expand and develop this ecosystem.”
And Ericsson CEO Börje Ekholm, who oversaw the $6.2 billion acquisition of Vonage which closed in 2022, said, “Today is a defining moment for the industry and milestone in our strategy to open up the network for increased monetization opportunities. A global platform built on Ericsson’s deep technical capabilities and with a comprehensive ecosystem, that provides millions of developers with a single connection, will enable the telecom industry to invest deeper into the network API opportunity, driving growth and innovation for everyone.”
In November 2023, Ericsson announced a $2.92 billion impairment related to Vonage, and in July 2024 added another $1.1 billion impairment.
In a blog post from a team at McKinsey and Company published back in February, the company detailed how “network APIs can lay the foundation for entirely new” network-enabled use cases. “By enabling these innovations, telecom operators can position themselves as essential partners to enterprises seeking to accelerate their digital transformations.”
McKinsey and Company reckon that in the next five to seven years, “the network API market could unlock around $100 billion to $300 billion in connectivity- and edge-computing-related revenue for operators…while generating an additional $10 billion to $30 billion from APIs themselves.”
In response to a question from RCR Wireless News regarding transparent multi-party settlement as APIs are used to deliver new services, an Ericsson representative said, communications service providers (CSPs) will generally “provide APIs to the new company and get termination revenues based on generated traffic volumes. More specifically, the newly formed company will buy network APIs from local CSP networks and then combine and normalize them for sale to developer platforms.”
