Embedded sim cards will shake up the market, but what specific areas will be affected?
The benefits of embedded Sim (e-Sim) are far reaching. The technology - which sees the physical Sim card replaced with remote connectivity - promises to revolutionise everything from smartphones to machine-to-machine (M2M) and internet of things (IoT) applications.
The e-Sim market is still in its early stages, but the technology is already starting to reach consumers. Last year, the Google Pixel 2 became the first smartphone to include e-Sim when connected to the search giant’s MVNO, Project Fi in the US.
In addition, Apple is already offering e-Sim in some of its iPads and the cellular enabled iWatch, while Samsung’s Gear 3 smartwatch also includes the technology. Taking these expanding use cases into account, experts say it will only be a matter of time before e-Sim is widely used in other consumer devices.
But when e-Sim arrives on smartphones, it will have wide-reaching implications, not least because the technology completely disrupts the relationship between operator and customer. This is a concern for operators, who have historically sold smartphones through a high street retail-dominated approach.
If consumers are able to choose their operator dynamically using an e-Sim, there is less reason to visit mobile stores on the high street. The shift could also increase customer churn as ease of switching gives consumers the ability to change operators, or MVNOs, at will.
“Mobile operators have benefited from the physical Sim: The customer has to go into a store and receive a piece of physical hardware,” says Wally Swain, an analyst at 451 Research.
“The consequence of e-Sim is, this doesn’t have to happen. Mobile connectivity can be done over the air, so it will be hard for operators to maintain their brand relationship. E-Sim means there is more reason to buy handsets directly from manufacturers such as Apple or Amazon and they could, in turn, select the best network for you.”
More disruptive still, e-Sim technology has the potential to open up opportunities for manufacturer-owned MVNOs, as already demonstrated by Google in the US. Meanwhile, as less consumers visit the high street, the predominantly-online, wider MVNO market could benefit.
Benefits and barriers
Indeed, e-Sim offers benefits to both MVNOs and mobile operators. For example, customers will be able to temporarily add a local operator or MVNO to their phone when travelling abroad. “Because e-Sim allows consumers to store multiple operator profiles on one device, MVNOs and operators can grow their revenue through traveller clients in their home countries,” says UROS e-Sim programme manager, Mika Alamartimo.
There are also opportunities for those providing connectivity within IoT. According to Mike Conradi, partner at DLA Piper: “The technology makes it much easier for mobile operators and those looking to develop IoT as you can manufacturer billions of connected devices and then ship them across the world: You no longer need multiple Sim cards for different locations.”
As a result, he says, “almost anything IoT can benefit from this technology”, from connected cars to e-health.
Despite this opportunity, experts say mobile operators are worried that e-Sim could negatively disrupt the market, causing them to lose their hold over the customer. But Philippe Lucas, SVP strategy, architecture and standardisation at Orange is unconcerned.E-Sim only makes one difference to the way in which connectivity is sold, he says: “From a mobile operator point of view, the relationship with the customer will become digitalised”.
Lucas does not see this as particularly disruptive, and still thinks that customers will come into mobile stores to buy phones. “The customer will come into shops, but they will also be able to connect remotely if they want to. A consumer can subscribe online with Orange and it’ll take five minutes, rather than having to wait a few days for a physical Sim to arrive in the post”.
It’s a complex picture. But what is currently preventing e-Sim from widespread use? According to Alamartimo: “From a technical standpoint, it could be in use now. Why it isn’t more popular is to do with the business aspects. The smartphone manufacturers will add e-Sim to a product and will need to pay an additional cost for components – does it add enough value to make a profit?”.
Another barrier is, the area could see operators forced to adopt completely new business and distribution models. They will therefore need time to adjust.
At the same time, according to Michael O’Malley, vice president of carrier strategy at Radware, security must be considered. “Among all the considerations for making e-Sims interoperable and in establishing standards, we must not overlook security. Since e-Sim will make it much easier for mobile and IoT devices to move from network to network - just a click or a text - this now greatly increases the likelihood and complexity of attacks on mobile networks. “
There is not long to overcome these issues. According to rumours, 2019 will see e-Sim primary devices coming to the market. However: “There’s a probability we will see one or two cycles of primary devices equipped with both an e-Sim and a slot for a removable Sim card,” Olivier Sans, director of business development - IoT, e-Sim at IDEMIA says.
So, despite enthusiasm about the area, a wider move to e-Sim enabled smartphones is probably a few years off. Currently, the market is still testing the technology on secondary devices and this is likely to be the case for months to come, says Antoine Thomas, director of product management for on-demand connectivity at Gemalto. “Only a well proven, stable and largely adopted technology can be applied safely in primary devices like smartphones".
Meanwhile, the third phase of e-Sim provisioning specifications is currently being finalised by the GSMA. It includes areas such as app APIs, as well as enterprise and remote management, and should be ready by mid-2018, says Lucas. “We anticipate the certification process will be a couple of months later and the first product on the market early next year”.
Sans says the third phase is going to introduce additional use cases to the industry. Among the features announced as part of this, remote profile management gives the operator the capability to remotely turn on or off the cellular service on a device. According to Sans: “Until this third phase, it was only authorised on the device by the end use".
Meanwhile, the addition of enterprise specific applications offers the capability to remotely initiate the download of an e-Sim profile for cellular connectivity on a given device. The end user is asked to acknowledge this, when previously they had to initiate it.
Another feature, local profile assistant (LPA) API is a new set of APIs that allows a third party application to initiate the e-Sim profile download.
With the third phase due for completion this year, there is no doubt e-Sim will disrupt the entire mobile market. As 5G enters the fray, it is likely this will drive more IoT use cases, in turn increasing opportunities for e-Sim. According to Conradi: “If you are trying to get billions of connected devices out, then the reduced cost of Sim cards with e-Sim is attractive”.
Yet, as e-Sim makes its way into the smartphone market, the mobile operators’ sales channels are set to be severely disrupted. In the future, according to Kester Mann, analyst at CCS Insight: “Operators lose another way to differentiate themselves through the device and could become, even more, a provider of connectivity”.
But e-Sim will also offer more choice to consumers and put downward pressure on pricing. For the many nimble MVNOs in the market, this can only be a good thing.
Stay up to date with the latest on the e-SIM technology, join the live conversation with the industry leaders during MVNOs World Congress 2018, 23 - 26 April, now including e-SIM Connect.