Will Apple's eSIM upset operators?

01 Apr 2016

As featured in DisruptiveViews

In the middle of last year there was a lot of noise about the e-SIM. Most of this noise centered 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.

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