• Hyperscalers count their scale by the spread and sheer size of their cloud facilities
• Digital service providers (DSPs) should be ambitious about the number of partnerships they are able to forge
• Cultural change, openness and partnerships were judged to be the keys to success for digital service provision at the recent DSP Leaders World Forum

One thing that emerged strongly at TelecomTV’s recent DSP Leaders World Forum, held in the UK in June, is that a change in culture and partnerships are increasingly viewed as the keys to success in the digital services era. Without meaningful cultural change and a readiness to abandon or curtail some activities, partnerships are unlikely to be sought or to become successful. But with a careful realignment of activities, telcos as digital service providers could thrive as a valuable part of a broader IT ecosystem.

The fact is that the telecom industry is bumping along the bottom, struggling with low returns on invested capital. Billions have been invested in infrastructure but very little revenue is coming back to plump up the bottom line. There are exceptions of course – some telcos in some markets announce bumper growth quarters, as do well-placed suppliers – but the overall picture is bleak. Not only is demand for services and base connectivity currently weak, according to some projections it’s unlikely to improve over the medium term (the impact of generative AI on bandwidth demand and ultimate pricing, often raised as a potential telco saviour, for instance, is uncertain). 

Telecom sector watcher Professor William Webb – whose career has included a stint at UK regulator Ofcom and time at the helm of an internet of things (IoT) company – has spent many years pouring luke-warm water over unwarranted telecom exuberance, such as the over-hyping of 5G in The 5G Myth, published 2016. His latest book, provocatively entitled The End of Telecoms History, musters evidence to suggest that mobile data demand will plateau around 2027 because, he claims, we have sufficient data rates already, users won’t pay more and investors won’t fund infrastructure on the basis of “build it and they will come”. Webb is thinking about the short to medium term, anything could happen on a longer-time scale.

In fact, Webb’s choice of book title suggests that he’s preemptively shooting himself in the foot in case he is spectacularly wrong. The End of History and the Last Man by Francis Fukuyama, towards which the book’s title knowingly nods, prophesied that human history is moving towards a state of idealised harmony. Everything has a percentage chance of being wrong or right and Webb would be the first to admit that known unknowns could conspire to throw his projections right off course: Fukuyama wrote his work when democracy was on the up and the Berlin Wall was on the way down, while Webb’s telecom world looks bleak, and his projections are based on current data and trends.

But what about the long-standing telco ambition for advanced services? The idea was and is that it should be possible to build extra value and enterprise engagement on top of the base connectivity, it was just a question of picking the right technology developments.

Hopes were initially pinned on the concept of network slicing, which envisioned creating tailor-made services for each ‘vertical’ industry segment, by providing an optimal mix of network features and enhancements for each. Plans were laid, research and consultation with industry groups was initiated, use cases identified, but… wheelspin!

With progress slow and not everyone convinced that slicing was the right approach (too ‘top down’ or ‘sideways across’, perhaps) slicing seemed to be stuck in a perennial holding pattern above its landing strip.

As a result, the past couple of years has seen faster rising expectations for a more modular, software pick ‘n mix approach focused on application programming interfaces (APIs).

Standard APIs meant telcos could offer corporates a way to plug their applications into the telecom network (or multiple telecom networks) to use their embedded features, analytic capabilities and connectivity services, thus granting network applications developers access to telco smarts and network services (for a price, of course).

The question was: How could such an approach be organised?

Up until recently, API attractiveness for developers had been blunted by each telco doing its own API thing, bearing in mind that they were originally designed for telcos to tinker with their internal network software and infrastructure.

As a consequence, today’s diverse telco APIs are relatively less attractive to developers, since anything constructed to work with one telco’s API set can’t easily work with another without painful and time-consuming integration, and this naturally outrages the software developer principle of ‘write it once and reuse it as many times as you can get away with’. 

The obvious answer was to build universal telco APIs and develop a standard gateway. This role has fallen to the GSMA, whose CTO, Alex Sinclair, provided an update at the DSP Leaders World Forum on its Open Gateway initiative, which now involves 53 operators, representing 245 networks, between them responsible for more than two-thirds of the world’s mobile connections. According to Sinclair, 28 universal or standard APIs have so far been published and the task now is to bring on board developers and channel partners to move the process along. (For more on this topic, see The Network APIs Strategy Report, which has just been published.) 

So are APIs the golden ticket? They certainly look like part of the answer, but any over-enthusiasm needs tempering. According to IDC, the network API sector is expected to grow at 57.1% (CAGR) over the next five years, from $700m in 2023 to $6.7bn in 2028, which is good but, when split out amongst all the telco participants, only represents a faint nudge for the revenue needle – see Network APIs: Telco traction and IDC’s forecast.

It’s important to stress also that the ‘value add’ expressed in the IDC calculation will be diluted across all the players joining the API ecosystem as channel partners, system integrators and aggregators – a natural consequence of greater openness and partnership.

It is still, however, a major step forward because, in the words of The Great Telco Debate founder Chris Lewis, it illustrates that “telcos can’t do it all” – and they know it. “They no longer own their own ecosystem, they’re part of a broader ecosystem,” and the rise of standard APIs and third-party involvement is another proof point of that change.

According to Lewis, “Getting the infrastructure out to the edge absolutely summarises the challenge the industry has, which is that we have been a very centralised industry and we’ve tried to dictate the way things are done. What is required at the edge now (to meet customers’ real needs) is not just connectivity but security, analytics and all the things that go to make up the services,” he said during an interview at the event.

In effect, says Lewis,“the move to the edge sort of democratises telecoms a lot and hopefully we will see it thinking more broadly about its role in the ecosystem.”

The move to the edge for telcos, then, should be interpreted as a sign that “telcos are increasingly adapting their way of behaving” to support the directions being taken by their customers and ecosystem partners. That way, DSPs stand to win the much sought-after buy-in from corporates who want the freedom and agility to tap innovation their way.

The growing adoption of standard APIs for app developers to tap telco network capabilities fits with this narrative too. “It’s a big shift, said Lewis, “but it’s the fundamental change that the telco industry has to embrace.

Right throughout the DSP event there were conversations and observations that supported the notion that DSPs had already properly bought into Lewis’s ‘democratisation’ theory.

This was particularly apparent through the Building digital infrastructure from core to edge session, where much time was spent on the need for ‘layering’. According to Dean Dennis, managing director of global solutions at Verizon Business, the challenge is meshing the technical underpinnings and keeping pace with tech changes while coping with the arms race in the vendor’s space. “The approach we’ve taken is to abstract the technical layer from the operational layer so the ITIL [Information Technology Infrastructure Library] stack is air-gapped from the technology stack, because the tech stack is just impossible to keep up with,” he said

According to Vivek Chadha, SVP and global head of telco cloud at Rakuten Symphony, there’s a “growing awareness of the need to abstract the infrastructure technology layer from the external view. Also managers are saying they need to prepare the infrastructure to do things in a more agile and elastic way.” Having done that, he says “I can have an independent discussion and vendor selection to determine what I’m going to put on top of it. Rather than trying to bake the whole enchilada in one go, they’re going to have to start slicing it up.” 

Francesca Serravalle, head of infrastructure and energy at Vodafone UK, agreed but stressed the need to have a change in culture to go with it. “Customers want solutions, not capabilities,” she said.

That’s a lot of change and a new way of thinking, but one that telcos will need to embrace if they’re to make the most of the assets, and willing partners, they have at their disposal.

- Ian Scales, Managing Editor, TelecomTV