The idea behind the embedded “e-SIM” or “Virtual SIM” card is really nothing new. In fact, Apple applied for a patent for “Dynamic Carrier Selection,” outlining a method by which users could use a built-in card to switch between wireless networks (and potentially carriers) on the fly, way back in 2006, a few months before the release of the first iPhone.
When that patent came to light several years later there was a flurry of speculation about what such dynamic network technology would do for traditional telecom operators, but that din died down after nothing materialized.
But now having installed similar embedded SIM cards on several of its iPads, where the card is integrated into the device and can be reprogrammed to access any wireless network, Apple stands poised to introduce this still largely nascent technology to the smartphone market as well, potentially providing the most significant disruptive factor to the wireless industry that telecom operators have ever seen.
As I mentioned, the concept of the e-SIM card is, at least at this stage of the game, a fully embedded card within the phone that can be programmed and reprogrammed by any carrier to access any network, removing any need for users to switch hardware and making the process of choosing one’s network incredibly easy. The benefits are numerous, including cost-savings that include roaming, convenience, choice, and added security.
Now of course the challenges posed by e-SIM technology are exacerbated when you realize that post-paid wireless contracts are going the way of the Dodo bird, with customers both increasingly keeping their devices longer, and opting for cheaper pay-as-you-go prepaid options. Combine those two trends with e-SIM technology, and you effectively have Apple’s dream: customers who are able to switch carriers and networks on a month-by-month basis, with no hardware switch or early termination fees.
It would be similar to trends we see already in emerging markets, where customers will often carry multiple prepaid SIM cards that they switch between to garner the best deals and the best network service, except without the need for users to physically switch anything at all. How long until e-SIM technology allows users to switch carrier completely on the fly, thus making such traditional carrier claims of network coverage all but obsolete?
While again I’ll say we have yet to see the full disruptive potential of this emerging technology, consider the impact on the telecom industry when customers’ loyalty becomes device-centric instead of carrier-centric; it puts an awful lot of power in the hands of the device manufacturers…at the expense of telecom operators of course.
Such a landscape would be a far cry from the days of iPhone exclusivity, where AT&T held customers hostage with forced carrier loyalty. If Apple does include e-SIM technology on its next significant iPhone upgrade, users will have unprecedented choice of carriers and networks, particularly those who purchase their phones outright and opt for prepaid service.
So where does that leave telecom operators? First off, the threat posed by e-SIM technology is not a new threat per se, just the continued development of the existing ability to switch between carriers, so perhaps operators are not as unprepared as they seem for this new trend. Second, I believe it will put pressure on carriers to do one of two things (or perhaps both): either accept the death of traditional telecom, particularly as such new technology is accompanied by the increased presence of MVNOs, and transition into a true digital service provider, or remain the dumb pipe that they’ve become and compete on the one thing that still matters in this world…service.
As telecom analyst Tony Poulos writes, “Dispensing with traditional SIM cards would save them a lot of money and now that the idea of controlling the customer with a proprietary SIM is all but dead why not concentrate on attracting users just on great service alone.” Simply put, there are opportunities for forward thinking operators to embrace the emergence of the e-SIM, allowing carriers to focus on the benefits of better service instead of trying to hold on to their past dominance.