A few years back Apple attempted to launch an embedded SIM (e-SIM) in its mobile devices, but shelved the idea when European operators threatened to ditch the iPhone.
Unfortunately, for carriers at least, things have changed rather a lot since then and e-SIMs are now one of the biggest disruptions facing the mobile industry today.
The GSMA is working on a standard for embedded SIMs (e-SIMs) and remote provisioning, and it will be one of the hottest topics up for discussion at the February 2016 Mobile World Congress in Barcelona. The task is a fine balancing act between what device manufacturers crave and what is good for the mobile operator industry.
We know that Apple and Samsung are keen to roll out the technology in their newest phones, but how is the e-SIM going to affect mobile operator business models?
A key change will be the rise in intermediaries placing themselves between operators and customers, displacing the traditional relationship and leaving operators as nothing more than infrastructure providers. Ian Fogg, the respected IHS analyst, said the Apple SIM - a blueprint for the new e-SIM standard being hammered out by GSMA - could “fundamentally change the relationship between mobile operators and users”.
Windsor Holden at Juniper Research agreed, telling the research group ReThink that the e-SIM will “dramatically change the way the mobile industry is structured” and is “another step towards the greater erosion of the mobile network operator’s stranglehold on the mobile value chain”.
Mobile virtual network operators may be able to perform a role switching customers between networks. Because switching will be technically much easier for the customer, MVNOs will have greater purchasing strength in the wholesale market. Increased downstream competition could lead to a spot market that would lower prices.
Google’s Project Fi, which is an MVNO offering in the US, is geared to provide the best available data network performance by combining mobile data and Wi-Fi connectivity. The decision about which network to connect to is based on the best available speed and bandwidth. Combine this heavy-hitting MVNO with an OTT provider and it leaves the operators in a tricky position.
Because e-SIMs enable a smoother ‘hand-off’ with dynamic operator selection, over-the-top providers will be able to provide more reliable voice services, which rely on a Wi-Fi connection or temporary cellular connection. New entrants could offer pricing schemes including refunds for unused, prepaid minutes.
Roaming services, and therefore roaming agreements, could also see fundamental change as it would be far easier for travelers to switch, with just a couple of clicks, between providers. An e-SIM could even automatically switch from one network to another and thereby cut out roaming charges altogether.
The arrival of the e-SIM suddenly places mobile operators at a key crossroads in how they progress and improve their business models and network agreements.
“Revenue is at stake, and operators’ approaches to new propositions, shared data-tariff portfolios, potential new revenue streams, and handset-subsidy strategies across multiple markets will play a big role in how they fare in the new e-SIM ecosystem,” say McKinsey analysts in a recent report.
The e-SIM creates a new mobile industry landscape - operators need to ensure they will survive.