Ray Le Maistre, TelecomTV (00:05):
The nascent telecom API sector was shaken up in September with the announcement that a dozen major telcos and Ericsson, the parent company of Vonage, are forming a new venture that will provide network APIs to a broad range of developer platforms. Ericsson will hold a 50% stake in the new venture while the network operator participants will jointly own the other half of the new venture, which it is promised will be open and non-discriminatory to maximize value creation across the industry. So what exactly will this new company do and what does it hope to achieve? Well, to find out more, I'm talking today with Peter Arbitter, senior VP Magenta, API at Deutsche Telecom, who has responsibility for the network, API exposure business at the German Telco, which is one of the new ventures founders. Peter, great to talk with you again. Thanks very much for joining us again today. Can you start by giving us a big picture overview of the new network, API venture being formed by the dozen telcos and Ericsson

Peter Arbitter, Deutsche Telekom (01:16):
Ray - absolutely. And thanks for having me. Yes. So we are about to create this venture I'm saying we are about to create because we are currently in the process of filing for regulation. So this one is subject to the approval and I do not want to do any gun jumping, but I would like to describe what our plans are. So the plans are that in the beginning of next year, we will then have founded this venture, which then consists, as you said, of 12 telcos and 50% and then 50% owned by Ericsson. Now the 12 telcos are nicely spread from a geographical perspective. So we have four from the Americas with T-Mobile, US AT&T, Verizon and America Mobile. We will have four ones from Europe where we have Vodafone, Telefonica, Orange and Deutsche Telecom, and then four from the eastern part of the Bharti with RJIO, with bti, with SingTel and Testra.

(02:26):
So what we are then doing is by us these 12 telcos investing into a business. This business is already existing and has been carved out by Ericsson and insiders or people who are closer to the network. API business are aware of the fact that Ericsson has ramped up a platform called GNP, the Global Network platform. So this GNP business has been carved out and we the 12 CSPs going to invest into that as soon as we've done. So we are going to go selling the network APIs and we're going to do that to five clusters we have described. And these five clusters are the CPAs, aggregators, the hyperscalers, the system integr integrators, mainly the global system integrators and is Wes. So software companies. And the fifth one that have been for the fifth ones are the CSPs by themselves. So that means that while every one of us has a standalone version of an API, by providing this and selling that to the venture, we can buy back from the venture.

(03:48):
And why should we do so? We should do so because you might have realized that I left out one really important customer segment and these are enterprise customers and the enterprise customers won't be served by the venture. We did that on purpose. They will be served either by those four groups I've caught out or by the CSPs. So this describes the demand side and just briefly, the supply side are not only the 12 telcos, even if we had been somehow the founding fathers mothers of this venture, we will definitely invite and have invited and we'll continue to invite all the other telcos to then provide supply.

Ray Le Maistre, TelecomTV (04:37):
Thanks Peter for that overview. How do the ventures founders hope that this will help network operators strategically and financially?

Peter Arbitter, Deutsche Telekom (04:48):
Yeah, the target here is all around the acceleration of the adaption of network APIs. And the reason why we came up with adventure is all of our past experience of APIs we wanted to expose. So this is definitely not new for the industry. I mean we have seen these attempts for the past 15 years and if I just look back at one recent and recent to a certain extent is not right because these three APIs, the identity APIs or mobile connect APIs as they are also known, they have been defined in 2015. And then it took us at least on the Deutsche Telecom side, eight years to monetize these APIs. And eight years is definitely something we can't accept forward looking. So to really drive digitization forward, we need to talk about rather eight months but not eight years. And one of the problems always has been that due to antitrust reasons, we are not allowed to talk to each others as telcos because in that particular case, the regulation beliefs that due to us being competitors, we should ensure to not talk to each other, to not align our plans.

(06:15):
What is quite difficult if you want to create a new market field where it's not about competition, where it's about business development, but if you are not aligning yourself, then one builds the one API, the other one, the next API. And from the customer perspective, this is useless because you need full coverage. Now with the venture we've created, we are somehow solving this challenge because this venture is independent and that venture independently can talk individually to each of us, can sink in these individual dialogues, these individual plans and come up with a proposal of somehow a telco roadmap, a telco proposed way forward. And that makes it much easier and then also faster for all of us to have one north star to work towards. And let me also clearly point out one topic. This venture is not about generating profits on the aggregation, not at all. So sure the venture will make some money, but that some money is just that much to be self-sufficient. So just to cover the own operational costs but not to generate additional profit on top of that monetization will happen with the termination of APIs just repeating myself, but not through the aggregation.

Ray Le Maistre, TelecomTV (07:48):
Okay. Well no, I think that's a point worth repeating because I think these are the kind of details that people are looking to find out about how this venture will work. So yeah, accelerating the opportunities for the telcos with their network APIs. But how will this new venture help the application developer community? Because obviously they're the other important side of this whole approach to the market.

Peter Arbitter, Deutsche Telekom (08:20):
And that brings me to another main target of what we were striving to do. This is to make the developer's life significantly easier. So in today's world, so if there wasn't that kind of aggregation function, then the developer has to look at the availability of these APIs. And even if they are standardized from a technical perspective, they're not standardized from a commercial perspective. So there would be different SLAs, definitely there would be a different prices. And then from a developer perspective, it is on you to then evaluate where a user could sit in which network and what termination costs might occur. So that's really complex and again, in a worst case scenario, you would find multiple marketplaces with some CSPs being present in that one marketplace, others in the others. So you would actually have to connect to many of these marketplaces or even telcos directly.

(09:32):
So that's all what we would like to avoid by making the developer's life easier and simpler because we are now offering that one marketplace, that one stop shop. And let me be clear, we also believe that there will be additional marketplaces next to the venture, but probably not 25, probably 5, 6, 7. So still somehow decent number to overview, but let's get back to that one marketplace and to the venture. So that venture will offer one SLA, so it will combine all the different SLAs and southbound APIs collected and will expose one somehow new API with one SLA. And now depending on the pricing strategy, there will be one global price. There will be also regional prices. Now, depending on what the developer's needs are in the very easy way, it's one SLA and one price and no one has to think about routings, no one has to think about lifecycle management of APIs, which where we might find different versions being implemented on the CSP side, this is all handled by the venture.

Ray Le Maistre, TelecomTV (11:02):
Okay, well that certainly sounds like it's going to make it a lot easier for the developers, which will be great for the market. Now as mentioned, all of the founders are going to hold an equity stake in the new venture, but can other telcos join and do they need to take an equity stake in order to reap the benefits of the ventures efforts? I mean, how does small resource constrained mobile operators fit into this overall picture?

Peter Arbitter, Deutsche Telekom (11:35):
Yeah, this is really a great question and I got that quite often and I'm really glad that you raised that because there might be a misperception and let's clearly address these topics. So first of all, everyone is asked to participate. Everyone can participate rather as a commercial partner or you might want to invest. But I mentioned earlier that venture is not built to create dividends. So you really have to ask yourself what the additional benefit is if you were investing, if you could get the same absolutely the same by not investing and just being a commercial partner. So first of all, yes, you can join and you ask to join. There is no disadvantage of someone joining later than earlier. There's no difference of someone owning parts of the company to the ones who are just commercial partners. Everyone is treated absolutely equally. And there's in that particular case, then even an advantage for the smaller ones because size does not matter in that particular case.

(12:53):
So you will get the same treatment or you actually benefit because you now get access to all of these customer groups. I pointed out earlier, the aggregators, the hyperscalers, the system integrators, the ISVs with one contract, you get access to all of them. You don't have to integrate 10, 20, 30, 40, 50 times as a telco into these potential customers by just one integration, technically and commercially you are done and you even get an onboarding support because it's of the ventures interest to get you on onboard as fast as possible. So in no means there's any kind of negative notion of not having been amongst these 12, we actually could have invited 30, 40, 50, a hundred to get that started, but we realized that we probably would slow down that set of process if it was 50. And we thought that with 12 of us, we are really overseeing the telco industry and this is why we had limited the negotiation to 12, but definitely not now the ventures activity.

Ray Le Maistre, TelecomTV (14:16):
Okay, that makes a lot of sense. Time is of the essence here. Everybody wants to accelerate this as quickly as possible. And that's good news for the broader telco community about involvement there as well. Now Ericsson, the owner of Vonage is set to hold a 50% stake in the venture and Google cloud is cited as a partner to the venture. Can companies such as Nokia, Samsung, Huawei also participate? And can all the hyperscalers become partners? There will probably be some concern in the industry that this will be something a bit of a closed shop and result in some market fragmentation.

Peter Arbitter, Deutsche Telekom (14:59):
Cliff, that you also asked this question, especially if there is that perception out that this could be a closed shop, not at all. So we really are really inviting everyone, not only now on the CSP side, what we consider being southbound, also northbound to really join us. And we have had more discussions than with the companies than the ones we have mentioned in this press release. And we got clear signals from some aggregators who told us that they definitely would like to join or would like to become partner of this venture and they would not do own aggregation. Why should they do so if someone does aggregation in a very lean setup, and I have not mentioned that earlier, let's mention it here. So the way we are setting up this venture is that it's super lean that it only adds a small additional markup for the aggregation and for additional functions like consent management and the routing.

(16:11):
So if this is done at the lowest cost possible, why should someone copy something where you can't differentiate? So there is not really a huge additional value in doing so. And this is why as already started to say aggregators have turned around and said, sure, we are going to join. We don't get our hands dirty with all of these complex things, especially since this venture just does aggregation on L two level and leaves all the additional upper levels L three, L four. So this is where then value can be generated, leaves this to the market. So that was the aggregator's response. We also talked to the one other additional hyperscaler to the one you have called out. And also there we got a clear signal that even if they would do aggregation for some tier one telcos, they will have a hard time to look at the long tail to talk to 6, 7, 8, 900 CSPs on a global basis, not mentioning the MVNL, the virtual network operators where that number easily becomes a four digit number.

(17:28):
So there we also got clear signals that even if they continue with their application plans for tier one, they definitely will partner with a venture especially on the long tail and then even where we evaluate the strategy way forward. So this again, looking at these channel partners for them is a win-win situation. Now you also mentioned Nokia, Samsung zone, Huawei, which are more considered being now hardware partners or infrastructure partners. And bear with me if you would categorize them differently, but the APIs we are exposing in the way they are exposed are hardware agnostic. So absolutely given that you can always, if you sit on an non Ericsson infrastructure, can expose your network APIs through the venture. Absolutely.

Ray Le Maistre, TelecomTV (18:31):
Now of course the other part of the industry that will be interested and involved in this is some of the industry bodies and specification developers. So is this venture supported by the GSMA and the Linux Foundation which are driving the Kamara open source project that is developing the network API specs for the industry?

Peter Arbitter, Deutsche Telekom (18:56):
Yeah, let me get started with Kamara because there is really most obvious. So if I look at the governing board of Kamara and pick on a few individuals there. So we have Nathan Rader from Deutsche Telecom, we have David DelVal from Telefonica, we do have Alicia Miller from Verizon and we have China Wood from Telefonica. These four are members of the governing board. These four had been integral part of our negotiation round. So with that it is very obvious and clear that Kamara not only had an interest, they were really directly engaged and involved not really in their URA function, but the same individuals which also play an important role on the URA side and also GSMA. If we look back and what they had evaluated, they had realized that after setting up open gateway, what is a platform, this platform economy now needs to solve two things.

(20:07):
You need demand and you need supply. So if you look at the analyzers they have done on the GSMA side, they described a special purpose vehicle to ensure that it doesn't take too long to get that supply. And they are also looking at an demand creation function. Now when realizing that the special purpose vehicle is about to be built by the industry, what is fully aligned with their ideas, they now turned around and are further evaluating this demand acceleration function. So in other words, it's a hundred percent aligned with what GSMA is driving forward. It actually is the execution of their concept.

Ray Le Maistre, TelecomTV (20:55):
Okay, yeah, that makes a lot of sense as well. So it sounds like a lot of positives for the industry here. Obviously we look forward to hearing more about this venture in the coming months and also when it finally goes into commercial operation in 2025. Now while you're here Peter, can you just give us an update on Deutsche telecom's Magenta business, API service? What kind of market traction are you seeing currently?

Peter Arbitter, Deutsche Telekom (21:27):
Yeah, and this is why I've updated my shirt and I need to move a little so that you can fully read that. I think the last time I had the version bullish, this time I have the version still bullish and this describes the status we are currently in. So we just recently had Digital Lakes in Cologne, this huge fair where we had close to 50,000 business customers and we ran a print house, an API print house and not just by Doche Telecom, we had invited Telefonica, Vodafone and Orange together, we presented use cases and first customer projects and there a lot of things became obvious. So first of all, by us jointly presenting this is not A1C SP show, we either jointly are winning and setting up that new marketplace or none of us does. So while we are continuing with that strategy, that is a joint effort, we had seen really not only some great momentum with customers visiting us and the interaction we saw also the use cases we had presented were really interesting ones.

(22:50):
I mean if we look back over the past six to 12 months, in many cases we have seen the fraud prevention use cases, which are very obvious because they rely on this mobile connect APIs, which are now known since eight or nine years. No, we came up with some new things and let me call out one or two. So what I'd like most currently is the use case. We had presented together with a German food retailer and that German food retailer company called River. For the ones who know that German market, second largest one in Germany, they participated in a payback in a customer loyalty program called payback, which cost them a three digit million number per year and they recently terminated that contract. So that's public knowledge. So I'm not talking about some NDA topics here. So the reason for them to terminate that partnership was that the difficulty with these customer loyalty programs is that you just know who which customer you are talking to at the point of the checkout.

(24:07):
So whenever I'm then checking out the retailer recognize me as their customer, and this is really not the best setup and this is why that new system makes use of a lot of telco network APIs. So we have device location, we have KYC, know your customer, we have for sure consent, we do have number verify and we have the carrier billing and these. And just in that initial first version, five APIs really describe a fully new customer experience where by the time you enter that store, you are already recognized as a customer and that's totally different interaction of that store with their customer. So that was the one which I found most compelling. I also liked very much the use case Orange presented that came from the Olympic games in Paris where the security folks used population density to manage the customer flows. So without installing new hardware, new systems by just using functionality which is available in your network, they were able to add a tremendous value to the security management there.

(25:35):
So there are many, many more use cases which are rising. And now with one gap we have filled what is the existence of the venture, we are overcoming that one challenge. We always saw that we need to have this global availability of the APIs. Definitely we need to have country coverage or even then region coverage or really a global coverage. And this is something where now the venture coming back to the story, the venture now really helps to overcome that one hurdle which somehow hindered us to not fully go through the roof. And I'm really looking forward and this is why I'm still bullish, very bullish in driving that topic forward.

Ray Le Maistre, TelecomTV (26:23):
Okay, that's great to hear. Bullish is good and it's clear as well that everybody is still learning about the potential of the network APIs and that more and more use cases are coming to light as the weeks and months go on. So a really interesting part of the market to track. And Peter, thanks very much for joining us today and explaining a lot about this venture. It's attracting a lot of interest in the industry and I feel like it's going to start playing a major part from 2025 onwards in the development of what everybody wants, which is new business generation for the telecom sector. So thanks very much and great to talk to you again today, Peter. Thanks very much.

Peter Arbitter, Deutsche Telekom (27:11):
Thanks a lot Ray.