SIM cards don't make sense anymore

03 Jul 2017

It was a great idea to develop the SIM card for GSM phones. It made it possible to have a carrier independent phone and change carriers easily. But it is based on technology from 25 years ago. Virtual SIM cards would make much more sense nowadays. It can be a scary idea for carriers, but in the end they can be winners.

Apple has introduced their own SIM card for iPads. Google has Google Fi, a kind of Google’s international data plan that allows users to choose and change a carrier. But these are still very limited solutions only for certain devices mainly in the US. Even giants like Apple and Google have been worried about how carriers react, or maybe seen some reactions behind the curtain. The carriers have also limited how innovations like the iPad virtual SIM card can be used. Technology is not the problem, manufacturers have already created these, and vendors including Gemalto also have eSIM models.

Roaming has been an important and highly profitable revenue source for carriers. Now that revenue source is getting drained, compelling carriers to offer more global roaming packages, while customers often buy local SIM cards and use Wi-Fi more.

The use of mobile networks could be like the use of Wi-Fi services; the user selects a service and then buys a package that could be only for a day or for a year. Of course, this would completely change carrier competition, and companies are always worried about changes. At the same time the move could offer many opportunities for carriers too.

Let’s consider some opportunities for carriers:

  1. If all devices, including tablets, laptops and even other devices like cameras, would have a virtual SIM, it would become much easier for people to use them in mobile networks. People could use mobile networks for temporary needs, or to replace broadband. Some people could also take more than one subscription for their device.
  2. Carriers could consider if they really need the existing expensive brick and mortar sales network that often also makes customers unhappy, when lowly-paid, often under-educated people try to sell complex pricing models with SIM cards.
  3. Maybe handset vendors would take a bigger role in financing handsets to users, and carriers wouldn’t need to worry or take risks with that.

Someone can, of course, say that handset financing with longer-term contracts is the way to tie customers to a carrier. But I’m not so sure this really makes sense in the long-term. Or, at least, I would like to see calculations that really compare different models, including cutting the costs of many existing operations and opportunities to sell more.

Another argument against the virtual SIM can be that then competition between carriers would be about pricing only. But isn’t that already the situation? I would say it could become more about quality too, when people could really compare different carriers in practice. Many carriers are also getting to the content business, and with good online stores to sell subscriptions, there are also more options to package and cross sell content and other services.

Carriers haven’t really been successful to create new business models although they have used a lot of money, when they’ve tried to enter apps, content and value-added services businesses. Maybe they could next really focus on re-inventing their own core business, and really have an open mind to make it better, more profitable and scalable.

All businesses go digital. Carriers should be the professionals and leaders of the digital business. They should really think about how to utilize digitization at the very core of their own business. Does it really make sense to have hundreds of stores, thousands of people and those ancient micro-cards from the early 1990s to sell an online service to customers? Or would it make sense everyone could easily start to use their services, wherever, whenever and on whichever device? I would like to see well-reasoned responses from strategy officers of the carriers.

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