Is eSIM the saviour that will finally bring down wireless prices?

Expected to arrive in phones in 2017, embedded chips could make switching carriers easier.

planhub, sim cards, esim

The eSIM Saviour:

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What to do to get North America’s high wireless prices down? More competition? More regulation?

Technology may be part of the answer in the form of the eSIM – or an embedded subscriber identification module. It’s coming soon, which means those wireless prices may also be coming down in the near future.

Most mobile subscribers are familiar with regular SIM cards, the thumbnail-sized chips supplied by carriers that enable phones to work on their networks. But those chips, which can be removed and inserted into other phones, are actually a pain for both carriers and consumers.

For one, they cost money. They’re relatively inexpensive for carriers, but the companies often charge customers for them – a $10 or $15 fee is not uncommon.

The bigger issue for the consumer is that a new SIM is needed to change carriers, which means going into a store or ordering one online and waiting for it to arrive in the mail. Either way, it adds to the hassle of moving one’s mobile service to another provider.

For their part, carriers don’t necessarily like SIM cards either because they have to expend resources training staff in how to properly activate and provision them.

The eSIM promises to change all that. As its name indicates, it’s embedded into the device and isn’t removable, but it can be written to and programmed remotely. All the necessary information for connecting to a carrier’s network can be quickly downloaded. Devices can be made instantly ready for network compatibility and switching.

Industry analysts believe this spells trouble for carriers. As a recent report from Morgan Stanley puts it, “Mobile customers would find it far easier to switch carriers at will, which likely will force carriers to find new ways to differentiate themselves to attract and keep business.”

More than 65 per cent of wireless network experts expect eSIMs will lead to a decrease in customer loyalty, according to a recent poll by German software provider Mücke Sturm & Company.

It makes sense – carriers will inevitably have to sharpen their pencils and offer better deals when switching providers becomes as simple as tapping a button on a phone.

ESIMs are already being deployed. Some cars, such as Audi’s A4 and Q7, and a few wearables such as Samsung’s Gear S2 Classic smartwatch are equipped. Apple also its own flavour with the Apple SIM, found in some iPad models. In each case, users can purchase on-the-go data from a variety of sources.

While some carriers are resisting the idea of eSIMs, they could also prove to be a boon to progressive carriers: “The new model could also… [expand] their playing field to more hardware – from cameras and cars to the growing ecology of the Internet of Things,” according to Morgan Stanley.

ESIMs are expected to start arriving in phones in 2017, and Apple is particularly well positioned to take advantage if it chooses to.

Not only does the company already have its Apple SIM, it has also started to distance itself from carriers with its own iPhone leasing program. Consumers in the United States, United Kingdom and China can make monthly payments with the company directly to ensure they always have the latest iPhone.

Morgan Stanley believes eSIMs can be a big positive for device makers, since they can continue to cut out the middle men. “[It’s] an opportunity to increase direct sales to consumers, which in turn creates more opportunities to boost revenue through device financing, extended warranties and other extras, such as content,” the firm writes.

Entrepreneurs and startups, sensing opportunities, are also jockeying for position around the potential shift.

Vancouver-based Otono Networks, best known in Canada for its Roam Mobility roaming service, is one of them. Through its AlwaysOnline Wireless brand, the company is spring-boarding off its mobile virtual network operator (MVNO) roots to offer data plans on iPads.

The company recently announced a deal with U.K. operator Three to offer data access on iPads by the hour, day or megabyte, bringing its total to 74 countries. Otono also recently signed a deal with German security firm Giesecke & Devrient to resell its eSIM capability.

“While eSIM has seen initial opposition from some carriers, the reality we see is that handset manufacturers are becoming the ones with more bargaining power in the market, since consumers no longer need to buy their phones straight from the carriers,” says Otono chief executive Emir Aboulhosn. “I always want to believe the consumer ends up winning out at the end of the day.”

Not everyone is convinced. Telecom analyst Dean Bubley says the potential of eSIMs is overblown, with the likes of Apple and Samsung unlikely to include them in their flagship devices. Adoption will start slowly and ramp up in 2019, amounting to a total install base of one billion devices by the end of 2021.

“While significant, this only represents around 10 per cent of total cellular connections,” he writes. “In a nutshell: eSIM is an important evolution for some use-cases, but it is neither an outright ‘game-changer’ nor a major risk to traditional cellular business models.”

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4 Comments on Is eSIM the saviour that will finally bring down wireless prices?

  1. Funny how this is full circle back to the CDMA days of ESN’s.
    Back then, Carriers refused to active an ESN they didn’t sell, not that it couldn’t be done (I remember a Sprint Palm Treo activated on Bell before the introduced that rule), just they wanted to ensure (pricy) hardware sales.

  2. It’s an interesting evolution for data-only devices, but it won’t make much difference for voice. Bell will still take weeks to release your phone number to an other carrier.

  3. Shawn Altorio // November 2, 2016 at 12:39 pm // Reply

    With the big 3 all working together to keep prices exactly the same, I don’t see this as having any effect here in Canada.

  4. In this day and age it makes no sense that I need a little piece of plastic to make my phone work with a different network when the phone itself is completely compatible. Just another excuse to drive consumers to the local mall, visit the phone store, and try to upsell them on some new overpriced bundle.

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