Application Programming Interfaces (API) enable network operators to capitalize on existing network infrastructure to facilitate the third-party creation of a an array of business opportunities for carriers on a global basis. Telecom APIs allow carriers to disseminate valuable data to third parties, which they monetize on an asymmetric basis as network operators typically do not provide services to the end-users. The use of APIs is also causing an evolution of business models within the ecosystem.
API Business Models
Two-Sided Model
One of the most common API business models adopted by most carriers at the start of the API commercialization is the two-sided business model, where the carrier charges subscribers for access and third-party service providers for APIs. In this model, revenues from traditional core services can be augmented with revenues derived from the use of their IT assets by partners, for instance, by allowing their billing systems to be used by third-party merchants in return for a transaction fee.
Developer Attraction Model
The second business model is exposing APIs to attract individual developers, who are presented with a pre-defined route to market for their applications and access to APIs based on billing, SMS, messaging etc. Many notable Tier 1 carriers have created application stores that utilize APIs to deliver rich downloadable apps that can be delivered through the operator portal, potentially reaching millions of subscribers.
Developers are now starting to embrace carrier initiatives, as the latter are starting to become developer friendly – contrary to earlier schemes that required developers to familiarize with complicated telecoms-grade protocols.
Mash Ups Model
Another major business model is based on web “mash-ups,” where web developers can combine web services with telecoms functionality to embed voice, SMS or LBS to existing applications, including enabling communications for social networks. In present circumstances, although monetizing mash-ups may not be a major driver, the additional traffic generated by mash-ups may incrementally add to existing voice and data revenues.
Evolution of API Models
The use of APIs by companies who do not make their use widely known is also increasing. Many companies are reinventing the way applications are built within their own enterprises by exposing their existing assets as APIs, enabling their internal developers to build innovative new mobile, social and cloud apps. Many of the "traditional enterprises" are employing APIs to increase their overall agility in delivering applications and to open up new opportunities for dealing with partners.
Mobile network API models are evolving. For instance, aggregators are now considering a model in which they pay the carrier for access to the SMS network, and then sell that network capability to large brands and enterprises on a revenue share basis.
Because the aggregators may operate and manage the platform, they can apply intelligence, priority, full analytics and assurance to the brand or enterprise it is selling access to. It's a change of business model both for the carrier, who usually sells bundles of messages to aggregators and service providers, and for the aggregators themselves.
As for most other categories of APIs, however, in the future carriers will ultimately become a utility, more third parties and intermediaries. However, the pace of the transition will be relatively slow.
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Editor's Note:
The blog post is collaboratively written by members of the Mind Commerce staff.
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