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13 December 2022

Telefónica to work with hyperscalers on revenue-generating API platform

Most of the world’s largest operators are considering their future relationship with the major US hyperscalers and seeking to leverage various assets, such as the potential edge compute/5G combination, to strike an improved balance of power. Telefónica is reported to be in talks with Amazon AWS, Google and Microsoft to support a platform for marketing application programming interfaces (APIs). Open APIs will be foundational to future connected software platforms and will underpin immersive, joined-up experiences such as the metaverse.

But operators’ success with their own API platforms – whether single-company or cross-carrier efforts such as the ill-fated Wholesale Application Community (WAC) of 2012 – has been very limited, especially compared to the huge power of apps platforms and ecosystems linked to the cloud giants and to Apple and Meta.

Telefónica aims to build a new API ecosystem as a foundation of its new digital strategy, and has clearly acknowledged that, to achieve success, this will need the support of hyperscalers and potentially other operators, in order to attract a large number of high quality developer and apps.

According to Spanish reports in Expansión, the operator has approached the three cloud companies to help it build an ecosystem around network APIs, as a cornerstone of a planned new unit dedicated to deploying fully programmable connectivity infrastructure. Insiders indicate that Telefónica sees the prospective API marketplace as a source of revenue, as it would sell access to the APIs rather than making them openly available.

That, in turn, suggests that the Spanish operator has gone cold on previous efforts to monetize apps directly – a model that is dominated by Apple and Google – and is instead playing to its strengths in underlying network infrastructure, while focusing on making that programmable and accessible to the software community, rather than merely selling connectivity per se.

Two weeks ago, Telefónica was reported to be planning a new brand and an investment in technology to making the programming of networks easier and more efficient. It is expected to provide full details at February’s Mobile World Congress.

The new unit, according to El Economista, will aim to enable developers and digital service providers to customize network capabilities easily using APIs. For instance, developers could pay to use APIs that would enable them to configure cloud services in real time, using 5G and edge compute to minimize traffic loads and boost response times. The operator is reported to be using the brand Earth Computing or Terra Computing, both of which Telefónica applied to trademark in September.

This project fits in with other directions Telefónica has discussed for its network roadmap. Executive chairman José María Álvarez-Pallete has often talked of the opportunities that arise from programmable networks, incorporating new enablers such as blockchain. The operator’s global CTIO, Enrique Blanco, has described programmable 5G networks as a “must”.

Other reports indicate that Telefónica is working closely with management consultancy McKinsey to develop a new business strategy to strengthen the operator’s resilience in a time of macroeconomic disruption. This would include stepped-up digitalization efforts based on investment in several key enablers including APIs, blockchain, metaverse and Web3 technology.