How the eSIM is shifting the power balance in the connected market
Every year, industries undergo a certain level of digitisation, usually in pursuit of greater efficiency. Once in a while, though, there is a much larger surge which, while promising much better alternatives, also threatens vast shifts in the structure of the marketplace.
The latest of these comes with the introduction of the eSIM to the mobile market, which could potentially change the relationships and responsibilities of the entire connected device value chain.
What's the eSIM all about anyway?
The 'e' stands for embedded—the SIM is installed onto the motherboard of the device itself, for the lifetime of that device. So far, so sensible. More tech real estate; a better customer experience; and another step toward full waterproofing.
Except, no manufacturer would expect their customers to be wedded to the same operator for as long as they had the device. Besides, it's impractical. Leaving aside potential breaches of competition and market regulations, what happens if the customer travels to a country the operator doesn't service? What if the operator fails, or merges?
Thus, the fundamental characteristic of the eSIM is remote provisioning: the ability to update the SIM over the air and store one or more operator profiles. This is the revolutionary bit. Remote provisioning is not a new concept—it's available on removable SIMs. But it is the beating heart of the eSIM—none will be shipped, or indeed bought, without it.
It means the profile can be installed during manufacturing for some use cases, installed automatically on first boot of the device for others, or installed by the user when they take the device out of the box. What's more, a new profile can be installed at any time, such as when the customer goes on holiday and lands in another country—no more queues at the airport to get a local SIM.
The rise of the OEM
As the eSIM is becoming available on mainstream products such as the iPad and Apple Watch, we are already seeing a shift in the roles of OEMs, chip manufacturers and MNOs when it comes to the consumer.
Traditionally, both the SIM hardware and profile came from the operator. Now, the OEM provides the hardware in the device. This has potential for a variety of business consequences, the first of which is cost (it will need to buy the embedded SIM chip itself). But wider eSIM adoption, in the longer term, will hand the OEM a vastly greater influence over how the profiles are provisioned and – in theory – an enhanced and guaranteed user experience.
What's more, the ability for customers to easily switch between operators without having to change the SIM could threaten the existing longevity of customer-operator relationships.
Initially this would be limited to the prepaid and SIM-only segments of the market but, as the GSMA notes, there could be an increase in other retailers (or device vendors) offering financing deals on handsets to spread the cost of the device—reducing demand for locked SIMs and post-paid deals with operators. Some OEMs are more than ready to fill this void in consumer interaction: already, most have built brands that are the envy of most operators.
A new landscape for connected devices
The embedded SIM and remote provisioning are coming. Perhaps not overnight, but both are nonetheless inevitable.
For now, the traditional SIM card approach will continue as the mainstream solution. Soon, however, the benefits of embedded remote provisioning will become too important for the M2M market to ignore. Widespread adoption into the consumer M2M market (wearables) could very lead to an expansion of remote provisioning into handsets (embedded SIM or removable).
Disruption, especially digital disruption, is rarely predictable or linear, and it is yet to be seen where the chips will fall.
But OEMs are in an enviable position: used wisely, it will be them who seize the prize.
Find out more about how Truphone is building a better future with eSIM.