The telecommunications market is expected to see significant revenue opportunities from opening up APIs into their networks, but that telecom API opportunity continues to lag due to basic proof of concepts (PoCs) that are not driving real revenue opportunities.

John Byrne, research VP for IDC’s Communications Service Provider Operations and Monetization practice, said during a recent webinar that early telecom efforts to dip their toes into the API revenue stream have been lackluster.

“What's been interesting is that a lot of the early activity has been somewhat rudimentary, if you will,” Byrne said. “It's been almost a proof of concept on things like solve a simple problem, be it in anti-fraud or security or something simple.”

Byrne added that most of these early examples have involved a communications platform-as-a-service (PaaS) (CPaaS) developer “can solve a simple problem like ‘I don’t want to have to do two-factor authentication, I just want to know my customer is secure.’ So that solves a basic problem.”

However, Byrne added that “it doesn’t really move the revenue needle very much.”

“What we haven’t seen so much is use cases and proofs of concept around the API sets that can provide more value like quality on demand, which is kind of the big driver here, but we haven't seen a whole lot,” Byrne said.

Byrne did point to one “interesting use case” that involved U.S.-based carriers AT&T, Verizon, and T-Mobile US completing a test of an industry led cross-carrier API interoperability service targeted at helping operators derive more revenues from their data-rich 5G network architectures. That effort involved work with a drone manufacturer to use open APIs to support drone flight and management.

“Which is obviously something where you can't afford to lose your connectivity,” Byrne said of the test. “And the concept was, can we all agree on the same standards and ensure that if my network is going out then I automatically go to my competitor’s network.”

Can hyperscalers help unlock this telecom API opportunity? IDC predicts the worldwide telecom and network API market will be generating north of $6 billion in revenues per year by 2028. However, the current lack of moving “the revenue needle” is beginning to show.

Ericsson, for instance, recently wrote down an additional $1.1 billion of its purchase of Vonage Holdings, which has so far not produced the promised financial return on Ericsson’s $6.2 billion purchase. Ericsson tied the devaluation to “lower anticipated market growth rates in Vonage’s current portfolio.”

“Given the deterioration in the market environment and elective decisions we have made to refocus our investments in strategically prioritized areas, we have reassessed certain growth assumptions,” Niklas Heuveldop, head of Ericsson’s Business Area Global Communications Platform and CEO of Vonage, noted in a statement on the move.

The move comes less than a year after Ericsson slashed $3 billion from Vonage’s valuation, which it attributed to a “significant drop in the market capitalization of Vonage’s publicly traded peers, increased interest rates, and overall slowdown in Vonage’s core markets.”

IDC does note that the telecom and network API opportunity has put additional pressure on telecommunication service providers to be more aggressive in positioning themselves against more technologically advanced and focused industry segments that have historically taken most of this revenue opportunity. This includes hyperscalers, which have spent their existence developing and nurturing the cloud-based ecosystem telecom operators are now trying to foster.

“Hyperscalers, to me, have a huge untapped opportunity by just by the sheer volume of the cloud developer community and the reach within all these different verticals where the high-value use cases might come from,” Byrne said.

However, those hyperscalers are facing a steep educational curve in getting that developer community up to speed on the telecom and network API potential.

“They have a high bar of reaching and educating those developers to understand, ‘OK, let's take your cloud capabilities, your edge compute, whatever you might be able to pull in from the cloud, bundle that with a service API bundle so that you're building a use case for an end-user customer,” Byrne said. “There's a lot of potential there, but it’s not going to happen by itself. It needs to come with a very large component of educating the developer community.”

The ability of the ecosystem to bundle these opportunities remains a significant hurdle toward the broader market hitting expected revenue expectations.

“Our assumption is that the value comes from building larger use cases and not just from these individual buckets,” Byrne added.