The humble SIM card has shrunk somewhat since its debut in the early 1990s. From the original, full format SIM, to the Mini SIM, to the Micro SIM and finally the Nano SIM, it may have reduced in stature, but it has remained the backbone of the mobile communications industry for almost 30 years, and it has ensured that the network provider has been the heart. However, the rise of the eSIM could drive a major change in the role of the network provider.
The eSIM, or embedded SIM, is a programmable SIM card. The consumer version of the eSIM enables remote provisioning, which allows users to download multiple operator profiles, switching and deleting them as they please, without having to play around with physical SIM cards. This means that they can have access, at the push of a button, to the services of several providers on one phone, although only one network profile can be active at any time. The GSMA released their eSIM standard for remote SIM provisioning (RSP) in 2017, and early devices such as the Samsung Gear S2 and Apple Watch 3 are already available. We can expect many more eSIM-enabled consumer devices to hit the market in the next couple of years.
eSIM offers numerous benefits for consumers, the most significant of which is the ability to change network providers more readily. Consumers will be able to select the provider that best meets their needs at that precise moment, whether that means the best coverage or cheapest tariff, similar to how they select a WiFi network. This ability to switch provider is supported by advances in the speed of mobile number portability and number virtualisation. Key eSIM vendors have also started to address the ability to move eSIMs seamlessly between phones, even when the phone is lost or broken.
However, eSIM isn’t limited to smartphones; the major driver will be M2M connectivity and the Internet of Things (IoT).
How will eSIM impact MVNOs and service providers?
It is likely that eSIM will affect the relationship between original equipment manufacturers (OEMs) and network providers. Many OEMs are attempting to sell phones and devices directly to consumers, via their own branded online and offline stores, as well as through resellers - a shift that is accelerated by the recent trend in network providers offering no-contract and SIM-only deals. Without the physical context and inventory of traditional SIM cards, phone manufacturers may start to lead consumer decisions on network selection at the point of sale, displacing operators as the primary channel for phone and connectivity purchases.
Not all OEMs will want to disrupt the relationship with their biggest customers (the operators), so they may enter into agreements to promote one operator as their preferred partner. However, new device manufactures with no existing relationships will start to emerge, further changing the market dynamics and competition.
For operators, eSIM will fuel connection growth for IoT/M2M applications as the number of embedded devices - which will be found in everything from smart cars to smart street furniture to smart agriculture - increases. One objective for eSIM in the M2M/IoT context is the ability for manufacturers to select or change network provider post-manufacture, either en masse or individually. This may be required when the goods arrive in their destination country, or if they need to find an alternative network provider, without having physical access to their product. Operators must prepare their services so that they can provide dedicated M2M/IoT practices for this new market.
What must VNOs do?
eSIM is likely to increase churn as consumers will be able to change providers more easily, particularly in the pre-paid market. They will be able to download a new operator profile just by going online or scanning a QR code. This means that churning customers may never visit your stores or come into contact with your sales assistants, changing your ability to acquire, retain and up- and cross-sell to them. This means that VNOs will need to change their acquisition and retention strategies for eSIM devices. Digital acquisition programmes will become essential in the battle to acquire new customers through new social media, digital billboards and digital partner channels.
Operators with a digital operational model will have the upper hand as their customer behaviour analytics will enable them to predict when a customer might churn – for example if they changed profile the last time they roamed - and automatically enrol them on a personalised digital retention campaign. Direct digital interactivity can also be triggered when customers swap profiles using mechanisms that MDS Global has modelled and tested with specific eSIM vendors.
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eSIM-proof your business
eSIM will become mainstream over the next couple of years, so now is the time to plan and secure your role in the eSIM and IoT world. In addition to rebuilding your acquisition and retention strategies, consider how you will change your propositions to differentiate your business from the host of new competitors that will emerge.
Compete on experience rather than price. For example, the growing demand for multi-SIM deals to support companion devices, multi-play services and family groups presents an excellent opportunity to differentiate on experience. If you can deliver this with ease and offer a range of value-added services, such as sharing management, parental controls and internet security, your services will be exceptionally sticky, over and above providing just the connection.
Review every aspect of your business to ensure that you are agile, efficient and able to deliver these additional services, and make sure that you have the right technology, people and processes in place so that you can move quickly.
eSIM will soon be with us, and this is your opportunity to take the lead.
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