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Overlay Networks: The API Economy’s Next Frontier

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By Luc-Yves Pagal Vinette – Chief Strategy Officer

In the rapidly evolving digital landscape, overlay networks have emerged as a pivotal technology for enhancing network performance, flexibility, and security. As businesses increasingly rely on APIs to connect applications and services, overlay networks are poised to become the next frontier in the API economy. This article will delve into the key characteristics of overlay networks, their potential to revolutionize API-driven services, and the challenges and opportunities that lie ahead.

Recently, I have been quite surprised by an article from Ericsson highlighting the fact that an API economy wouldn’t be THE 5G savior and one of the Rakuten Symphony executives highlighting how much of a failure 5G happens to have become and that our industry shouldn’t be focusing on saving 5G but rather to provide true new B2B service offerings. Therefore, it triggered this following-up article from my first one last week.

However, the above-mentioned article wasn’t even addressing the elephant in the room: Monetization. Indeed, we can naturally imagine many ways that Telcos and hyperscalers could monetize APIs:

  • Direct charging for API usage: Telcos could charge developers a fee for accessing and using their APIs.
  • Bundling APIs with other services: Telcos could bundle API access with other existing services, such as wireless services with data plans, device subscriptions and even 4G/5G PWN (Private Wireless Networks), wireline services (Copper and other silos such as IoT or NTN (Non-Terrestrial Networks) such as Satellite, Microwave, etc..
  • Developing and selling their own API-based applications: Telcos could develop and sell their own applications that use their APIs to provide value to end customers.
  • Partnering with other companies to develop and sell API-based applications: Telcos could partner with other companies to develop and sell API-based applications.

With the expansion of the API economy beyond wholesale services and the increasing momentum among typical network service providers or Mobile Network Operators, it seems quite reasonable that hyperscalers play a significant role with Telcos/CSPs. This partnership not only enables telcos to broaden their business and operational footprints for both Cloud & Edge services consumption. But, also to leverage their cloud/edge platforms to extend the reach of APIs, using different approaches:

  • Direct B2B Sales: Telcos can directly target businesses/verticals that need to integrate with 5G networks. They can offer tailored API packages and support services to meet specific business requirements. This approach allows telcos to have more control over pricing and customer relationships.
  • Indirect B2B2X Sales through Partners: Telcos can partner with API partners where hyperscalers or MVNEs (aggregators or brokers) who specialize in connecting businesses with APIs from various providers. These partners can help telcos reach a wider range of customers and simplify the sales process. However, telcos may need to share revenue with their partners.

Both approaches have their advantages and disadvantages, and the best strategy for a telco will depend on factors such as their target market, technical capabilities, and business goals.

“Wireline/Wireless convergence mitigates connectivity commoditization”

While connectivity remains a significant source of revenue for the majority of telecommunications and communications service providers (Telcos/CSPs), the risk of commoditization is continuously increasing. Telcos/CSPs have been compelled to expedite their wireless/wireline convergence in response to this concern. This convergence will encompass a common set of capabilities, including service and customer provisioning, service orchestration and assurance, and, of course, invoicing and charging.

It is indeed expected that such a move of both important silo converging under a “single roof” could offer telcos/CSPs significant opportunities to differentiate against one another and against hyperscalers as well as mitigating the risk of commoditization:

  • More exciting Bundled Offerings: By combining wireline and wireless services, telcos can offer bundled packages that provide greater value to customers. This can help to increase customer loyalty and reduce churn.
  • Enhanced Customer Experience: A unified platform can improve the customer experience by providing a single point of contact for all services. This can reduce customer frustration and increase satisfaction.
  • Network Optimization: Converging networks can enable telcos to optimize resource allocation and network performance across both wireline and wireless technologies. This can lead to cost savings and improved service quality.
  • New Revenue Streams: A converged platform can open new revenue streams by enabling the development of innovative services that leverage both wireline and wireless capabilities. For example, telcos could offer IoT solutions, smart home services, or cloud-based applications.

Of course, often such rewards don’t go without challenges notably related to :

  • Technical Complexity: Converging networks requires significant technical expertise and investment.
  • Legacy Systems: Integrating legacy systems can be difficult and time-consuming.
  • Regulatory Hurdles: Telcos may face regulatory challenges when combining wireline and wireless services.

But overall, with a gain of certain years of experience in the industry I would argus that the potential benefits of converging wireline and wireless services outweigh the risks. The convergence of massive silos such as Wireline & Wireless could actually help in meeting regulatory requirements more easily, here is how:

  • Regulatory Alignment: Many regulatory bodies have been working towards harmonizing regulations for licensed and unlicensed spectrum. By converging both types of spectrums, telcos can potentially align their operations with these regulations more effectively.
  • Efficient Spectrum Utilization: Converging licensed and unlicensed spectrum can enable telcos to use both types of spectrums more efficiently. This can help to address spectrum scarcity and improve network performance.
  • Innovative Services: Converging licensed and unlicensed spectrum can facilitate the development of innovative services that leverage the unique characteristics of both types of spectrum. For example, telcos could use licensed spectrum for high-capacity services and unlicensed spectrum for low-power, wide-area services.

“How the title suggests, where does overlay networks and technologies fit in all of that, you might ask ?”

Well, it is a given factor that a converged service infrastructure requires a real overlay technology that encompasses both wireless and wireline domains and included sub-domains. Several candidates can compete for the supreme ring of controlling or subduing the others.

SD-WAN is indeed a strong contender for an overlay technology capable of encompassing various service domains. Its ability to abstract the underlying network infrastructure and provide flexible routing policies makes it well-suited for both telco and hyperscaler environments.

Our CTO Ishkhan Martirosyan adds to it “Contemporary, flexible networks are built using overlays. By abstracting the underlying infrastructure, we can truly introduce intelligence. This not only breaks the boundaries of the long-standing OSI and more modern NFV MANO models but also goes beyond the conventional means of networks by encompassing all Telco domains, closing the gap with Hyperscalers’ Edge services and integrating bolt-on AI  for different services, applications and tasks. Guess what! It goes even beyond all that. Is your network truly smart ?”

Other potential Candidates, could naturally put their hat on the table:

  • MPLS: While traditionally used for enterprise networks, MPLS can still be a viable option for telcos, especially for providing guaranteed quality of service (QoS) and network security. However, its complexity and potential for vendor lock-in can be limiting factors.
  • Network Slicing: This technology enables telcos to stitch domains-specific resources together and to create and manage logical services within a physical network, allowing them to tailor services to specific customer needs. Network slicing can be particularly useful for IoT and other emerging applications that require specific QoS requirements. However, it currently too technically complex to implement and manage on an end-to-end perspectives especially with hyperscalers.
  • Segment Routing: This protocol offers a more flexible and scalable approach to network routing than traditional methods. Segment Routing can be used to create virtual networks and provide granular control over traffic flows. It is gaining traction in the industry due to its potential to simplify network management and improve performance.

In many cases, a hybrid approach combining multiple technologies might the common situation to allow Telcos/CSPs to address their infrastructure transition to diverse requirements of telco service domains. For example, a telco might use SD-WAN for most services but employ MPLS for specific applications that require strict QoS guarantees.

Federating under a single technology banner can indeed be a more efficient and cost-effective approach in the long run. By standardizing on a single technology, telcos can simplify network management, reduce operational costs, and improve scalability.

Our CEO Alex Lacis highlights key SD-WAN overlay network capabilities “SD-WAN is instrumental in simplifying operator’s network architecture and help reducing operational costs. By centralizing control and providing flexible routing options, it’s been crucial to consolidate multiple WAN connections and optimize traffic flows. It helps not only reduced complexity but also lowers overall connectivity costs.”

Here are some key benefits of federating under a single technology:

  • Simplified Management: A unified platform can streamline network management tasks (federated Inventory, True Cross-Domains OSS, Converging BSS and Edge Based Orchestration) reducing the need for specialized expertise and minimizing human error.
  • Reduced Costs: By eliminating the need to manage multiple technologies, telcos can reduce operational costs associated with licensing, training, and support.
  • Improved Scalability: A single technology platform can be more easily scaled to meet growing demand, ensuring that the network can support future growth and innovation.
  • Enhanced API Exposure: A federated approach can make it easier to expose network APIs to third-party developers, enabling the creation of new services and applications.

In conclusion, overlay networks and certainly SD-WAN is poised to play a pivotal role in the API economy, offering telcos and hyperscalers new opportunities for monetization and differentiation. By embracing a converged approach that combines wireline and wireless services, leveraging API technologies, and federating under a single technology banner, telcos can unlock the full potential of overlay networks and position themselves for long-term perspectives.

#overlaynetworks #APIeconomy #networktransformation #APImonetization #connectivitycommoditization #customerchurn #digitaltransformation

Contacts :

CEO Alex Lacis : alex@ambear.eu
CSO Luc-Yves Pagal Vinette : luc@ambear.eu

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