Purpose of this article

Ericsson spent $6B on Vonage, we covered it in CXTech Week 47 2021. Simply, they made a mistake through not understanding the programmable telecoms market and the history of telecom APIs in telcos. I made a point in the most recent CXTech Week 31 2023 about how organizational learning in many telcos from their developer API experiences has not been retained. Frank Fischer is now  Vice President Information Technology at Adalvo. I’ve known Frank for over a decade, since his time at DT’s Developer Garden. If Frank Fischer was running DT’s OneAPI 2.0 program, it would be very different.

Should Nokia spend billions on a company like Vonage? No, however, there are other investments and strategies that learn from the experiences of fixed broadband networks, or focus on market realities not some evangelical belief in APIs. That’s what we’ll cover in this article, and what you’ll learn at TADSummit, 19-20 Oct.

Numbers are your friends

To understand the size of the business Ericsson bought for $6B. Vonage’s total Q1 2022 revenue was $359M, which split into:

• Consumer – $62M. Shrinking as they transition to a pure business focus.
• VoIP/UC/CC – $123M
• API (SMS, voice, video) – $162M of which the bulk (90%) is likely SMS
• Product revenues as businesses still need phones – $12M

Vonage has direct connect SMS deals with some Asian operators thanks to the work Nexmo did many years ago. In the rest of the world they generally work through aggregators, which has a big impact on margins. Ericsson and Vonage do not have low cost base, the current race in the SMS aggregation market is to lower the cost base, that’s why GMS and Route Mobile are attractive acquisitions.

In summary, Vonage’s enterprise comms business is $197M and API business is $162M. Twilio was $876M in that quarter. Nokia’s revenue was $5.3B in that quarter, hence Vonage’s API business is just 3% of Nokia’s revenue. That seems much ado about nothing. Ericsson must be anticipating something quite spectacular happening in a relatively mature SMS aggregation market. Nokia should invest appropriately, on a case by case basis.

What’s the plan?

The Vonage vision is it enables Ericsson to either sell VCP (Vonage Communications Platform) to carriers, or run it on behalf of carriers. The later being the more likely as most mobile carriers lack the people and processes to do that. However, within the intercarrier and enterprise sales groups there is some potential, but Vonage is competitive at the same time. At TADSummit you’ll meet some entrepreneurs who are taking advantage of that.

Focusing on the biggest API revenue component of Vonage, SMS. In the US Vonage goes through an aggregator with direct carrier connect, e.g. Sinch, Kaleyra, Infobip, Syniverse, or Vibes. So Ericsson need the carriers to choose VCP as their preferred SMS aggregator with direct connect to be able to offer a competitive SMS API.

There are quite a few barriers to that happening, deals are already done, not all carriers will select Ericsson, Ericsson and Vonage are not low cost operation. Bottom line is VCP is simply not that that relevant to most carriers. In the Middle East carriers work direct with big brands, what’s left are small medium business that work through local aggregators. Vonage lacks the sales footprint, and its competitive with carriers.

In the existing programmable telecom business VCP is competitive with carriers and their existing partners, and its cost base it too high to be competitive in the long term. Hence VCP is really for the ‘new’ CAMARA APIs.

Quality of Service Use Cases

TMO recently gave a video glitch removal example using a network slicing API. A network API for a rare problem where congestion in the 5G RAN or network is likely not even in the top 5 causes of the video glitch shows an industry desperately trying to find problems for its solution.

The more likely causes are the device / OS and all the apps running in the OS, the conferencing client and its battle for a slice of the device’s resources, the other video conference participants and all their multiple paths and resources to the conference service instance, the conference instance and its contention for virtualized resources, etc.. To think a broadband link of hundreds of Mbit/s, perhaps even a Gbit/s could be the principal cause of the video glitch is a little delusional. You know what’s going to happen, the service uses the QoS API and the video still glitches.

Another commonly mentioned use case is remote controlled machinery on an industrial site, equipment with multiple 8k camera and requiring near instantaneous feedback with the equipment. If its private 5G, it’s a highly constrained problem. The equipment’s private 5G can be provisioned with the necessary QoS for that equipment, rather than on demand. Its a network design / provisioning issue, just like in fixed networks. Learning from fixed networks is critical, mobile networks are not that different. This point will be important for how Nokia can make money from QoS and leapfrog Ericsson.

Public 5G scenario for the specialized remote control equipment is a slight possibility, that is a rare use case that is not over private 5G, but again the equipment can be provisioned with a fat slice or QoS profile when in operation. The fat pipe is not nailed up, it simply has priority.

We’ve been here before on QoS

Network QoS is not new, PCMM (PacketCable Multimedia) offered dynamic network QoS with APIs about 20 years ago on fixed cable broadband, remember the turbo button? There’s much mobile operators could learn from the cablecos’ experiences. I helped Camiant, a leader in PCMM, break into mobile operators during the policy control and charging hype cycle.

Network as a Service (NaaS) is a mature existing market, it was covered at TADSummit in 2021 by Liang Dong of Epsilon (now KT) https://blog.tadsummit.com/2021/05/24/delivering-the-future-of-networking-with-hyper-scalable-connectivity-liang-dong-epsilon/. NaaS can be extended to Mobile broadband, but that’s more a network:network interface (NNI) rather than API. For example, provisioning a fat slice for that remotely controlled equipment.

Customers and developers do not care about fixed or mobile networks, they just care about internet access that works reliably and transparently. Keep the Nntwork API out of their way. Seriously, all the talking shops, telco vendors, telco consultants talking to you about the amazing QoS API revenues are not acting in your best interests. They just want you to pay for their current quarter’s invoice.

Note, the programmable telecoms industry is focused on service APIs: telephony, messaging, etc. Cable cos learned a network API just gets in the way for customers and developers. Focus on the NNI not the API when it comes to QoS, and that means NaaS, a mature business.

So what should Nokia do?

Don’t follow the CAMARA herd, CAMARA like OneAPI will slowly disappear and yet another product line will need to be EOL (End of Life).

Instead focus, deliver specific solutions telcos can sell today, NaaS. A package for converged telcos across fixed and mobile, local cloud services, and enterprise data centers. Package for mobile networks, local cloud services, and enterprise data centers.

Network-as-a-service (Naas) helps enterprises obtain the IT optimization benefits of modern cloud computing and broadband transport across fixed and mobile networks. The current market size is $8-12B depending on how you measure it, with a CAGR of 15-20% over the next 5 years.

Avoid Ericsson’s mistakes of competing with customers, repeating the mistakes of OneAPI, competing in a segment that’s focused on lower of cost operations. Rather focus on a specific market segment and help telcos execute. KT has a good solution with Epsilon, who presented at TADSummit on NaaS. Other carriers need to renew from legacy network management platforms to something like Epsilon. Nokia can be a perfect fit.

What Else?

There are loads of other opportunities, I focus here on Fraud and Identity a large, growing and critically important category. My purpose is to give some insight into the complexity of this market. Claiming you have an standardize API from CAMARA clearly shows there is no Fraud and Identity business solution.

Fraud and identity is a complex evolving market that is so much more than 2FA or silent authentication. It ranges from global aggregators like Experian, regional / specialized aggregators like SEON, local web-scrapers, enterprise IAM (Identity and Access Management) like Okta/Auth0, to CPaaS.

2FA is in decline due to competing technologies such as TOTP, Password Managers, FIDO, U2F and now Passkeys. Real-time mobile network data by itself is sometimes too expensive or too slow, telco’s backend systems were not designed for such exposure applications. It doesn’t matter what gateway is put in place the critical path is the backend system. Sometimes IP insight can be far faster and cheaper than mobile networks. Sometimes data that is hours or days old can be good enough, it all depends on the customers’ needs.

Because SMS 2FA, PhoneID, Silent Authentication, and other data is available from the carrier / phone some CPaaS providers have used their carrier relationships to offer an increasingly sophisticated range of fraud detection and authentication services to businesses. From the classic one time passcode when you log into an online service, to risk rating services across identity, credit, SIM swap, etc. Its an add-on that is part of the someone else’s business solution.

The risk rating market was oversold, in part linked to the ‘AI’ hype. A good rating is only as good as the data a provider has access to, that’s the really hard part. Also the data available from a mobile network may be only part of the answer, data aggregation is important in this market.

Enterprises are confused across all the different offers from quite different companies, it’s a mess, hence banks / financial services work with aggregators they already work with.

The telcos role in Fraud and Identity needs a clear channel strategy as they are often a part of a security solution for enterprises. Telcos should of course eat their own dog food in fraud and identity first. Then across their diverse customer needs identifying the low hanging fruit in their customers, then solutions with partners, and finally an acquisition. But time is short the Fraud and Identity market is evolving and consolidating fast.

Fraud and Identity can not sit as some special telco vertical, it’s part of a much broader and far greater online Fraud and Identity market. At TADSummit we have several presentations across this segment, where you can have insightful conversations to create viable strategies, not API-based belief strategies.