Time to consider a virtual SIM?
The Delta Perspective April 2014
The SIM card – still a necessity or an archaic way to minimise a customer’s mobility.
Last month, regulators in the Netherlands became the first worldwide to legalise network agnostic SIM (Subscriber Identity Module) cards, allowing stakeholders in the mobile ecosystem like device or M2M manufacturers to incorporate these SIMs into their devices. This could signal the start of a fundamental change in how the mobile industry utilises these unique pieces of hardware.
The SIM card that is so ubiquitous in our mobile phones has largely remained unchanged in the 20 odd years of its existence. Yes, it has grown in memory and has evolved from its full size (FF) to a nano SIM (4FF) but its primary purpose to identify a user to a mobile network so that mobile services can be delivered remains unchanged. The SIM card contains unique identifiers like an IMSI and ICCID, with complex authentication keys and security algorithms to prevent SIM card cloning and fraud.
Mobile industry slow to encourage SIM innovation.
The SIM card however, goes beyond just for the prevention of fraud. It is also a piece of hardware the telco industry see value in fighting over as it prevent subscribers from switching to another carrier. Even manufacturers like Apple and Samsung have caught onto it, preferring to use the micro and nano-SIM to minimise the possibility of subscribers switching their mobile connection to another device (under the guise of requiring more space in the phone).
There is no technical reason why subscriber profiles and SIMs cannot entirely be software based or network agnostic, as proven by the regulator in the Netherlands or virtual SIM vendor like Movirtu.
Imagine a world where instead of switching out a SIM to avoid the high cost of roaming or using multi-SIM devices, a mobile device supports multiple software based SIMs which can be selected to ‘emulate’ a physical SIM. To take it one step further, the device could be smart enough to dynamically switch between profiles so that a subscriber will always be making and receiving calls/SMS/data based on the lowest cost profile depending on the caller, called party, location or time of day. Pretty much a multi-simmer on steroids.
Back in 2001, Apple mooted such an idea of a ‘virtual SIM’ which immediately got telcos on the offensive to threaten the withdrawal of device subsidies, forcing Apple to back off. Telcos saw it as a concept which could disintermediate them from ‘owning the customer’ thereby increasing the likelihood of churn.
The implications of a Virtual SIM for mobile operators.
In an increasingly digital and ‘Internet of Things’ world, mobile operators will find it increasingly difficult to fend off similar forays from a whole host of players - the obvious ones would be the Internet giants like Facebook and Google who have no such device subsidy constraints, but could also include other industry stakeholders like cable providers looking to strengthen their quad-play offerings.
With industry developments like smartphones outstripping feature phone shipments, the emergence of LTE only challengers and the inclination of regulators intervening in the SIM space, it is only a matter of time before the virtual SIM becomes reality. The immediate implications for operators would be the entry of new players into an already overcrowded space. This brings along risks of churn, price wars and disintermediation.
However, it is also important to note that having a virtual SIM also opens up a world of opportunities. For example, subscribers can be acquired by simply downloading a profile online onto their phone. This reduces the need for SIM point of sales, fulfilment and logistics costs as well as customer acquisition commission costs. A virtual SIM also allows more information to be stored beyond the limitations of physical memory on a SIM card. A MVNO leveraging the virtual SIM could access multiple MNO networks, taking advantage of a spectrum ‘pool’ to offer the best coverage.
Ultimately, in an ‘Internet of Things’ world, the SIM could become redundant but operators should not forget that they still hold the trump card in terms of the billion dollar networks and scarce spectrum that the SIMs communicate with.
Mobile operators should weigh the risks and benefits for their respective markets and rethink the need to be wedded to a small archaic piece of hardware. It would be a wasted opportunity if the heavy hand of regulation is necessary to push what could be a catalyst for an entire new wave of innovation.
© 2017 Delta Partners.