Will an e-SIM in the Apple cart upset operators?

Written by on March 31, 2016 in Opinion with 3 Comments

Sim Card freeIn the middle of last year there was a lot of noise about the e-SIM. Most of this noise centred around the growing consensus that an e-SIM was an optimum way to connect the huge number of ‘things’ about to be connected to the internet, supposedly to prevent it spiralling completely out of control. This idea is rapidly being adopted by the major players in the IoT ecosystem.

What, though, of those irritating things called human beings? What impact will an e-SIM have on them and how they use and view mobile network operators? And what impact will Apple have now that it is rumoured to be implementing one in a future version of its iPhone.

In 2011, Apple was granted a US patent to create a mobile-virtual-network-operator (MVNO) platform that would allow wireless networks to place bids for the right to provide their network services to Apple, which would then pass those offers on to iPhone customers. Three years later, in 2014, Apple released its own SIM card—the Apple SIM. Installed in iPad Air 2 and iPad Mini 3 tablets in the United Kingdom and the United States, the Apple SIM allowed customers to select a network operator dynamically, directly from the device.

Noise levels grew but Apple seemed to get away with it. After all, Amazon had done much the same years earlier with its Kindle devices.

It would be fair to say that customer perception of communications is now focused squarely on the device. Everything else is secondary. Loyalty is generated by the device not by the operator (at the moment). The old arguments about ‘who owns the customer’ and the conclusion that it was the operator because of its billing relationship were, frankly, more about hope than experience. That was put to bed with the introduction of prepaid accounts which are now far more popular.

An independent e-SIM – on paper – should be a huge threat to operators. They would be at the mercy of device manufacturers and the enormous power that they can bring to bear on the industry, or would they? One could argue that the prepaid SIM has already achieved this. Roamers have for years avoided extortionate roaming charges by using a local prepaid SIM on landing in a foreign land, conveniently sold to them at an airport booth on arrival.

It is not uncommon for users to have a number of prepaid SIMs from different operators that they just swap out when they need to. This is especially prevalent in emerging markets where operators compete on price and offer great deals to lure churn customers. Making calls is more important than receiving them so the associated number is not an issue. Besides, most use applications to do the talking for them.

Today, operators need to become digital service providers and they know this. The need to be able to offer transactional experiences and intuitive offers and all the other things that we have discussed at length is critical. Where the e-SIM might be a huge challenge to a traditional, post-paid operator, it should conversely be embraced by a forward thinking digital service provider.

This is surely part of the evolution we have been experiencing over the last ten years that have seen the breakdown of the traditional communications service provider to having to diversify to remain relevant. One could argue, and many have, that they should stick to their knitting and provide the best connectivity possible and clear away all the flotsam and jetsam that add little or no value.

Dispensing with traditional SIM cards would save them a lot of money and now that the idea of controlling the customer with a proprietary SIM is all but dead why not concentrate on attracting users just on great service alone. If companies like Apple choose to acts MVNOs it would take away a lot of issues that CSPs face today, especially around revenue assurance and fraud. These would become Apple’s problem and operators would just send the bills to Apple who currently have a pretty good credit rating. Surely the other savings from reducing retail sales activities and associated costs would help balance the bottom line.

If Apple puts an e-SIM in its next iPhone, and then goes ahead with the MVNO idea, it may well provide a huge stimulus for operators to speed up their efforts to become what their customers want – the new look, innovative, in touch, digital service provider.

Bring it on.

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About the Author

About the Author: Tony is a freelance writer, regular speaker, MC and chairman for the telecoms and digital services industries worldwide. He has founded and managed software and services companies, acts a market strategist and is now Editor of DisruptiveViews. In June 2011, Tony was recognized as one of the 25 most influential people in telecom software worldwide. .

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  1. Avatar Ehtisham Rao says:

    Great read Tony. This sends chills down telco spines where they know the’ll be relegated as a pipe with little in the way of customer facing outcomes. The way telcos hold on to their business right now is through the very things they’ll be asked to sever with.: payments, care, local conversations and accountability. Kind of a big write down in their value and in quick time i suspect if Apple and Google were to move the juicy part to the device. The latest development in Mountain view calif. is pointing in a different direction than the virtual Sim of course. It comes into play at onboarding and voila you never need to do anything more with operators as using messenger they can control OTT and payments with simplified architecture. Here is the third option we are pushing with Servup; Telcos onboard customers on their globally integrated digital platforms as this may be their last chance of doing so .. with this they control a million use cases to co-create, Partner services and make a differentiated stream of IoT and local services and crucially have an engaged customer base.

  2. Dean Bubley Dean Bubley says:

    Meh.

    I think the chances of an eSIM in the iPhone are small. There’s a ton of extra complexity & exposure to local regulatory hoopla such as number portability, which Apple is unlikely to be bothered with for such a margin-dilutive service. Many other technical & commercial “gotchas” as well.

    Totally different ballgame to eSIMs in tablets & one which is consistently overhyped.

  3. Avatar tuck takagawa says:

    Thanks for your good article.

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