eSIMs are going to change everything in Australia
60 second overview of eSIMs and the impact they’ll have
Imagine you could change phone companies like you can change TV channels.
Picture the process :
You go to ‘Settings’ on your phone, press a few buttons to select the phone company and plan you want. Then, at the end of your contract, you are automatically moved from your old phone plan to a new prepaid plan that you love. The transaction is conducted for you there and then. The new ‘eSIM’ could make this a reality for you. And it could happen in Australia in the very near future.
eSIMs are going to mix up the market for phones in some significant ways. It won’t happen overnight but you’re going to be getting more for your money when you buy a phone plan. It’ll be easier to move phone companies and, unfortunately, it could make an already complicated market a little bit more complex to understand.
Let’s take a look at how we got here and the enormous world of change that lies behind the replacement the older types of SIM. They’re a tiny microchip which has defined our relationship with our phone companies for a generation. And it’s all about to change.
Introducing the new SIM type that will change how we buy phones and plans
There has been a relentless wave of change in technology over the last quarter century. Nowhere has the rate of change been more evident than in each new generation of phone. A simple thought experiment might help. Try imagining explaining to someone what a pager is or was. Consider trying to describe a key technology moment like the 2006 launch of the BlackBerry 7100 or trying to lift the weight of a car phone. Any one of these should remind us all just how quickly things change.
But not everything has changed at the same rate. It’s almost 25 years since the SIM card became part of the fabric of the telco industry. Phones themselves have evolved a great deal but the technology behind them hasn’t always kept pace.
I remember the first SIM I had. It was the size of a credit card and fitted in to the back of a Motorola phone. I think my mum still uses that device. SIM cards were a necessary evil for the phone companies. Optus, Telstra, Vodafone and the rest of them have used SIMs for as long as phones have existed. SIMs, or ‘Subscriber Identity Modules’ connect the customers of each phone company to their billing system.
But in some ways, they’re an entirely useless invention. You don’t actually need a physical SIM to connect you to a phone company any more than you need a certificate to watch Channel 9. SIMs are the ‘appendix’ of the phone company machine. No-one is quite sure why they’re still in use. If we were designing the system now, SIMs wouldn’t be used. You can change your electricity provider without changing the meter on your wall, so why do you need to go through the hassle of changing a physical SIM in a phone to connect to a new network ?
What is a SIM card ?
SIM cards have been a standard component in phones since early 90s, and they’re mostly produced by a single company : Giesecke & Devrient ( G&D ) in Germany. They can also be used to store some personal information like phone numbers etc.
The SIMple way to describe a SIM card is to say that it’s the way phone companies knows it’s your phone. SIMs enable you with all the services you need, on the phone company’s networks. In the industry, this part of the process is known as ‘provisioning’ you.
Provisioning, in the world of phone companies, means what it does in other areas of life. You just don’t hear the word much. When you set off on a hiking trip across Tasmania, you will have provisioned yourself for the journey. You’ll have food, water, clothes, everything you need to get going. The same is true when you join a phone company and they provision you. The act of provisioning gives you access to the services you need on the network. You’ll be ‘provisioned’ with calls, SMSs, data and anything else you’ve asked for – perhaps international roaming rights, for example.
In telco language, it is you who is provisioned with these services now, and it’s done by provisioning your SIM.
A new approach to SIMs is in the final stages of development
The GSMA are reported as saying : “With the majority of operators on board, the plan is to finalise the technical architecture that will be used in the development of an end-to-end remote SIM solution for consumer devices, with delivery anticipated by 2016.”
For years, there has been pressure on the phone companies from device manufacturers like Apple and Samsung to change the way SIMs work. The existing system, while familiar, is inefficient and makes it difficult for users to change phone companies. The alternative proposed is the eSIM.
Apple was the first to patent the idea of an eSIM. They have been progressive on the subject of SIMs for many years and successfully lobbied for both the micro and, ultimately, the Nano SIM.
The phone industry operates internationally, of course. That’s why you can use the phone you bought in Melbourne over in London or San Francisco. The organization that represents standards in the industry, around the world to ensure this inter-operability, is the GSMA or ‘GSM Association’. The GSM Association is an alliance of phone companies and related companies ( like phone manufacturers ) which unified the needs of these organisations around the world. GSM itself stands for the Global System of Mobile-Telecommunications. It couldn’t be more fundamental to the way phones work and work together. It’s hard to get your head around the scale of the GSMA. It represents 800 phone companies and another 250 related companies. They agree standards for the industry. The job of the GSMA is to agree what future technologies will look like including VoLTE and HD Voice will look like and how one phone will communicate them to another.
Within that remit, the GSM Association are discussing the adoption of standards (not yet completely agreed ) for an electronic SIM card. To succeed, the GSM Association will need to manifest it in the world of the phone companies. The eSIM is a new standard they have produced.
When will we all move over to eSIMs?
There are rumors that the launch of the eSIM could be as part of a ‘killer feature’ in the new iPhone. The Financial Times has reported that the eSIM rollout will take place in the UK and USA first.
The first phone companies to do are scheduled as : Vodafone, Orange , AT&T, Deutsche Telekom (T-Mobile), and Telefónica. You may not be familiar with all of them but these are the biggest international telcos. It may be significant for Australia that Vodafone are involved, albeit in the UK. We explain why, below.
The eSIM has many, many names
The standards for the eSIM are still being worked out. There’s no better way of explaining that than to point that out than to see the list of the other names that eSIMs are being called at the moment.
You could hear any of the following terms to describe an eSIM : Soft SIM, Virtual SIM, Embedded SIM, Electronic SIM or Remote SIM.
Even now, it’s not exactly clear which name will win. We are a more detailed analysis of the difference in terms in our article about eSIM vs softSIM and Apple SIM.
eSIM context – what else is happening ?
As always, it’s important to consider the other moving parts when we look at something as seismic as the move to eSIMs. There are a three relevant trends which overlap the requirement to change the SIMs we use.
1. The move to month to month SIM Only contracts :
For the last 3 years now, there has been a developing and marked change in the way consumers are engaging with their phone company. There has been a move away from contracts ( which include a phone and tie the user to a phone company. Instead, people are moving towards month to month ‘SIM Only’ agreements. Massive ( marketed, perceived ) improvements in the capabilities of phones released each year, the desire to have the ‘latest thing’ and a desire to save monty ( it’s often cheaper to buy the phone outright and add your own SIM ) have all contributed to individuals buying the phone themselves and adding a SIM.
2. Leasing schemes :
Both Apple and Samsung have announced leasing schemes in the United States. Instead of getting your phone under contract from Optus or Telstra ( which, as we’ve said is becoming less often anyway ) people will be able to lease their phone direct from Apple or Samsung. In the future, it seems likely that every device manufacturer will offer this service. Leasing schemes like this reduce the grip that phone companies have on customers. Once you’ve leased your phone from Apple, even if you only update it every year, you can change your SIM multiple times, during the same period.
3. Machine to Machine and the Internet of things :
The Internet Of Things is a huge subject in itself. We won’t try and cover it all here. Suffice to say that, in the future, many, many more things will soon be connected to the internet, often through the phone network, than there are today. Imagine a world where everything is connected to the internet : Utility meters, connected planes and cars, traffic lights and homes will all go online. Soon, there will be many billions of connected devices. Provisioning each with a unique SIM card will be impractical. An alternative which allowed people to connect each apparatus to the network they chose and move provider when they want to would, of course, be preferable.
Using the Apple SIM as a basis : How will the new eSIM work ?
The best way to imagine the way the new eSIM will work is to consider the Apple equivalent which is already in market. The Apple SIM is existing technology Apple released in the latest iteration of their iPad range.
Not everyone loved it. Most phone companies pushed back on it’s use. There were exceptions through. For example, in the UK, EE already supports the Apple SIM Apple standard in their iPad tablet range. It hasn’t been adopted in Australia by the phone companies. If it had been, it may have looked something like this :
How the Apple SIM might have looked if it had been adopted in Australia.
In this example, the eSIM allows the user to select the phone company they want from settings.
The Apple SIM and eSIMs in generally only work when the phone companies ‘play ball’. EE is one of the few that did when the Apple SIM was released. This is why it’s the standards body the GSMA who are leading the charge and considering the overall benefit to the whole system.
Based on the Apple SIM, we believe eSIMs :
- Will be embedded in your phone:
This can be hard to get your head around. eSIMs will conceptually be embedded in your phone or tablet. You will be able to move operators without changing a physical SIM in your phone. You will not be able to remove an eSIM from your phone because it’s virtual.
- Will be standard across all phones:
The same implementation will be used by Samsung, Apple, LG etc. They will all use the same ‘standards’ approach implemented by the GSMA.
- Will be accessed like you use any app / settings on your phone now: Call the option up on a menu, in settings on your phone and pick an operator / plan. The selection process will perform in the same way that setting an alarm or adding an APN currently does.
- Movement between phone companies will be easier:
Proponents claim that eSIMs will allow almost instant movements between phone companies. Since eSIM usage not an improvement in the porting process we will believe this when we see it!
eSIM benefits : What the eSIM will mean to you
eSIMs will have a number of benefits to individuals, phone manufacturers and companies that use them. There are a several reasons that the phone manufacturers (note, not necessarily the phone companies) want eSIMs.
- Phone plans will be cheaper :
Competition is likely to incentivize phone companies to offer bonus inclusions to attract new customers. The whole phone plan market is likely to operate as the prepaid plan currently does.
- Phones will be cheaper :
It will not only will it be cheaper to make phones in a world of eSIMs. Phones will also be lighter and more reliable. Having a SIM tray, a SIM, connecting it to a power source and apparatus to ‘read the SIM’ all takes up space and creates things that can go wrong. eSIMs will remove this now unnecessary hardware lowering the price of phones and improve reliability, removing the risk that they will break.
- It will be more convenient to move phone company :
It will be easier to move phone companies when your reason is price or something else like bad customer service. One click activation and simple menus as we’ve seen in the example above mean that anyone will be able to do it.
- Could lead to multiple services running in parallel :
With virtual SIMs deployed, it’s possible that people will end up using multiple SIMs and having multiple phone numbers, even if they have only one handset. It could be cheaper to have two cheap phone plans, one for use in the bush, one for use in cities, than to have one provider and a bigger bundle from them. Multiple SIMs could also lead to further efficiency improvements for business. Employees could be provided with one virtual SIM for in hours use and another for out of hours charring. The business simply pays for what it uses and relies on individuals to pay for personal calls.
- Better granularity :
Not everyone realizes it but different types of plans are available depending on the hardware type you have. One good example is the relatively cheap pricing of 3G plans. Easier switching and better information will mean it is easier to move from a 3G plan to a 4G plan or vice versa.
- Good for business :
It will be easier to manage handsets as part of large company Mobile Device Management implementations, another pillar required to progress the Internet of things. The incentive to move to new plans on an individual level will be substantial, especially for larger companies trying to optimize the bills of hundreds of consumers.
- Easier to swap devices when you upgrade :
eSIMs will mean an end to compatibility problems and explaining to your grandmother what an Nano sim is vs a normal SIM vs a 3FF SIM.
- Better roaming :
It will be easier to buy a network service in other countries when you are just visiting.
- Totally online experience :
Following the path blazes by the banks, eSIMs will represent a new step in to a totally online experience for phone users. People will no longer be buying SIMs in corner stores. They won’t have to call the phone company to cancel their service or attach to a new one. More and more self service transactions are undertaken using the phone company app every year, as it is. This is another step towards an end point of zero personal contact.
- More secure :
It will be easier to cancel, block or suspend a service it if your phone is stolen. In an eSIM world, no longer is the threat of thieves jail-breaking a phone and using it to make expensive calls something to worry about.
These benefits are just the most self evident. When the technology has been up and running for some time, who knows what additional capabilities it will engender. We have speculated on a few in the final paragraphs of this article.
They key point : eSIMs will mean a lot more competition for the phone companies
You don’t have to work all that hard to imagine the impact that the eSIM will have. There are presidents in Australia, already. Consider a parallel, existing market, the market for prepaid services which is already in operation.
The Australian Prepaid market is typified by deals with huge data allowances. They have to offer huge data incentives. Data is the key plan decision criteria these days. Data is what people want and they want it enough that they will change their provider to get it.
Having the opportunity to move so easily from one phone company to another means people are likely that people will try other networks. Without contracts, there will be a temptation to try Vodafone and see if it works OK, rather than pay the extra for Telstra. As we’ve seen in the potential benefits section, you may well, in the future, be able to run two ‘virtual SIMs’ in your phone at the same time. You will be able to use the cheapest at any time of the day.
Don’t kid yourself, the Australian market is already an incredibly competitive place to be. Most people buy their SIM from one of the bigger phone companies but there are many, many smaller phone companies out there vying for your business. Each focusses on a segment and attempts to service it well.
The Significance Of Vodafone’s Involvement
There are no Australian telcos on the list of phone companies who are in the first set which will start rolling the eSIM out. Neither Vodafone Australia, Optus, Telstra ( or, for that matter, any smaller phone company ) are mentioned anywhere as having the intent to put an eSIM in market – yet.
However, Vodafone is a big company. It operates in more than 30 territories around the world. Vodafone Australia is just one of their operating companies. The fact that Vodafone UK are mentioned as part of the first tranche in the UK, is potentially significant. It will give them a head start.
Vodafone is based in Newbury, England. They have a dedicated Global team which works out of offices there. The Vodafone Global team has a responsibility for sharing best practice from one phone company, with all the others. It won’t be long after Vodafone UK launches the eSIM that the lessons they learned are propagated across the globe.
In Australia, Vodafone have always positioned themselves as a challenger brand, trying to keep Telstra ‘honest’. In the event that Telstra try to block uptake of the eSIM, Vodafone could well play the ‘challenger’ card in the press and in their marketing to embarrass Telstra to release.
Summing up the impact of eSIMs for Australia
It’s not the first time we’ve heard rumors that Apple are launching an electronic SIM. Apple was suspected to be implementing them with the release of the iPhone 4S back in 2011. eSIM standards have been under consideration for years. Then coming again to the fore is, to a degree, a reflection of the power that device manufacturers currently have over the phone companies. A lot of people really want the iPhone and they care about the device more than the network.
It may take a while for eSIMs to become mainstream down here
Getting Electronic SIMs implemented requires agreement from a lot of people. Carrier agreement will be the hardest to get. It’s also key to the success of the endeavor. For obvious reasons, phone companies have resisted the release of the new eSIM standard. They know it will make it much easier for customers with an eSIM to switch to one of their competitors than it would be for the same person to move when they are under contract. What’s changed is that the GSMA, the Global body responsible for standards in the industry have announced that they are near completion of the necessary standards and agreements from their members. That means eSIMs are likely imminent. The only question is how long will it take to get to us down here ?
Change often takes longer than it should. It’s usually people who hold it back – a problem known as cultural adoption. Simply put, people can be scared of change. Aussies ( and the tier 1 telcos ) are likely to see if an idea has done well overseas in the UK before they take the risk down here. I suspect that the Optus and Telstra, if not Vodafone ( because they’re involved in the UK ) will delay the uptake of the eSIM for as long as possible.
Even when eSIMs do arrive, the shift to new smartphones which do not require an old style SIM will take a long time. The latest statistics from the end of 2015 show that smartphone adoption is an impressive 73% in Australia. That means that 27%, over a quarter of the country, is quite happy with an older feature phone. This, the better part of 10 years since the iPhone came out. Similarly, it will take a long time for eSIMs to totally replace hardware SIMs.
There are factors which will drive eSIM adoption, even by the phone companies
On the other hand, Australia is sometimes at the top of the list when it comes to adopting some technology quickly. Just take a look at the statistics that show the speed and voracity with which we adopted Social Media in to our lives. There are a number of trends which will speed the uptake of eSIM technology. As we’ve seen businesses are under pressure to use the Internet Of Things to improve the efficiency of their operations. And important lobbyists, the phone manufacturers are pushing for it to happen.
However long it takes, there’s no getting the toothpaste back in the tube. Optus, Telstra and Vodafone are likely to lose in the short term, suffering higher churn between them. They are also likely to lose many of their consumers to smaller phone companies which offer better value on SIM Only deals. With improvements in branding to make them more familiar household names, people are wont to try new things when the risk is low. The eSIM will eradicate a lot of the risk of moving to a smaller phone company. If it doesn’t work out, you can just move back nice and easily. It’s easier to switch with the eSIM in the equation and, as we’ve said, it is increasingly common that people are not under contract with their phone company.
There are incentives for phone companies like Optus and Telstra to sign up to eSIMs eventually. They are likely to gain in the long term. eSIMs will fuel uptake of the internet of things, first with business, driven to adopt to make their operations more efficient. Consumer applications seem likely to follow. Many new cars in Europe and the USA, for example, are now shipped with a SIM in them.
The far future impact of eSIMs
Even further in the future, a hyper-competitive market for phone services might promulgate apps which broker individual phone users’ needs from second to second according to network speed and coverage required at the time. The app could buy you what you need when you need it.
Google has already launched it’s own phone company through project ‘Fi’. There is no reason Apple / Samsung and others could not start their own phone company and invest in being an MVNO.
Competition between the phone companies has always been around plan inclusions. The eSIM and the new competition it brings could herald a whole new stage of plan types. 100 minutes and 1 GB of data to use on the Telstra network on the 2 days a month you’re outside the city area, for example.
It’s a race to the bottom for the phone companies as any competitive market with good information should be. The challenge for users, as always, will be keeping pace with the rate of change and the plethora of options they have to pick a plan for their phone.
The GSMA quote we used above was sourced here : https://www.engadget.com/2015/07/16/apple-samsung-e-sim/
Some well considered thoughts on the the future of the eSIM are shown here : http://library.ul.com/wp-content/uploads/sites/40/2015/05/The-future-of-SIM.pdf
MVNOs are smart. They’ve spotted the opportunity with the eSIM : http://www.mobile-virtual-network.com/2017/03/esim-opportunity-for-mvnos-mvnes-and.html