Imagine a world where, instead of needing to replace your SIM card when switching between operators or while roaming, configuration can be handled manually or over-the-air (OTA). The embedded SIM (eSIM) card is a concept that’s been developed over the last few years, accelerated in 2015 and is targeting this flexibility. Some research anticipates that in 5 years, 20-40% of all devices will be eSIM-enabled, disrupting fundamental structures in the consumer mobile domain. Will eSIM disrupt the telecom industry by presenting a new structure of customer ownership? How should service providers react to this threat, or is it in fact an opportunity?
What is an eSIM?
The eSIM was initially developed to simplify the provisioning of networks and parameters within 4G mobile devices. The idea is that instead of using a removable SIM, the SIM card is embedded within the device making configuration software-based – either manually or OTA. This dramatically reduces the barriers of switching between operators, while lowering the cost of device manufacturing and SIM distribution, as the latter would become unnecessary. The concept was developed originally for the Internet of Things/machine-to-machine (IoT/M2M) domain but is now migrating to consumer devices as well, and GSMA already released a standard relating to eSIMs earlier this year. In parallel to the standardization effort, over-the-top (OTT) platform players (such as Apple and Google) and device manufacturers (such as Samsung) have great interest in promoting this concept and technology to gain more of the mobile value chain at the service providers’ expense.
Impact on the industry
Is eSIM good or bad for the industry? Depends who you ask. For consumers, eSIM makes switching or roaming much easier. As a consumer, instead of asking for or purchasing a new SIM card and then opening and closing devices to replace the SIM, all you need to do is provision your phone online (e.g., using iTunes) to your new service provider. eSIM may also reduce prices because of increased competition due to reduced carrier replacement barriers. For OTT platform players and device manufacturers, it is a great opportunity. On top of reducing device form-factor costs, eSIM will enable them to become “service aggregators” and give them a major advantage in the customer ownership battle. Even if OTT players don’t provide actual mobile services, the fact that network provisioning and plan commerce is easy lessens their dependence on service providers to sell phones. For service providers, it is a great challenge bundled with an opportunity. Obviously service providers would like to keep the existing SIM card that provides stickiness. eSIMs that grant customers the freedom to switch easily between service providers may eliminate that stickiness, and increase competition.
Service providers are now investing great efforts in making sure that the new eSIM standards limit this freedom (for example, only being allowed to choose a network once). It is unlikely that service providers will be able to block eSIM innovations. However, innovative service providers with intelligent multi-play and B2B strategies may be able to offer strong differentiators. Multi-play strategy is a good example of how service providers can preserve their differentiators and stickiness.
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When a customer has multiple services (cellular, home broadband, TV, cloud and others) all from a single service provider, the barrier for switching to a different carrier is much higher – and differentiators are much more significant. An example of this development could be found in Apple’s actions last year when they released the first proprietary, programmable Apple SIM within their iPad Air/Mini offerings, and then making the devices SIM-embedded earlier this year. The offering lets users switch service providers without changing the SIM card (with limitations).
This demonstrates Apple’s clear interest in increasing their customer ownership through SIM disruptions and other complementary initiatives. The Apple iPhone installment plan, launched last summer, is also a strong indicator of their interest in customer ownership.
Most of the short-term disruption affects the competitive landscape between service providers. However, in the longer term, we could see “new types” of service providers that may take customer ownership from traditional service providers. This might affect the demands and requirements from business support systems (BSS) vendors in multiple domains. Some examples are the handling of SIM profile inventory (in a hybrid environment), “occasional usage”, scale, eCommerce, number portability and others.