Apple SIM -- a gateway for a new mobile model?

03 Nov 2014

Apple introduced its own SIM card with the new iPad models. It enables and empowers the user to select a carrier and also change it. AT&T immediately announced that it will not allow this; it is going to lock users to its network. Can the Apple SIM concept fundamentally change the wireless operator business model?

We can say that carriers have dominated cell phone business. They decided the selection of phones in their stores. They make the final pricing decisions, what kind of subsidies or payment plans they want to offer. Their staff has an important role in the consumer’s decision making. Apple has been a kind of exception, it has a stronger relationship with consumers than other phone brands and it has been able to play its own game.

Apple’s latest move with iPad SIM looks quite small, but it can be a gateway to a very different market situation. Now it is only iPad and a few carriers in the US and UK. Let’s assume that people are given the option of changing carriers whenever they want to without the need for a new SIM. Of course, people can already now change a carrier, if they have an unlocked phone and they acquire another SIM card. But if people could browse different options online and make the change online, it would make it much easier to change.

What would carriers then do? Incumbents definitely see this as a risk. They could lose a lot of users. But the challengers could have a lot to win. They could make attractive ‘join us now’ offers. And then of course, each one of them would try to keep existing users with volume and time period discounts, and probably develop more loyalty programs. So it would be more like any retail, hotel or airline business.

But the impact would not only be on pricing and online sales offers. It could have a fundamental impact on the store network too. Currently a store network is really important to sell phones and SIM cards and then tie people for a couple of years. If there would be more unlocked phones and other devices with a carrier selection option, it could change the store network planning. Maybe carriers would re-consider whether a large store network is value for money. It could increase the number of independent stores and online sales for phones. So far have seen the opposite development when e.g. Phone 4U went bankrupt in the UK when carriers wanted to sell their phones themselves.

Subsidies are an important part in phone sales. But could it be that phone brands would start to offer payment plans for phones? And maybe they could package other things with them, e.g. Google could offer its professional apps, Microsoft its Office, Apple its music and iCloud and Amazon content monthly subscriptions in the same package. The phone and monthly plan would not no longer be tied to network, voice and data, but content services and apps. It would be a real change in the business model. But we could say it would be natural in a certain way, if we think of how the use of the phones and tablets has changed.

This is all speculation, based on one ‘trial’ from Apple. Even if it comes only to tablets and laptops, it can represent an interesting change for the market. I assume that there are companies and people who would like to turn around this business and also the dominance of carriers. Carriers can of course make this difficult when they own the networks. But as with many things, it is also good to think, how carriers should work in this situation and even win with it. The best way for carriers to guarantee the position is to keep customers happy and willing to buy from them.

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