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22 January 2020

Ericsson tries to shield operators from worst effects of eSIM

Ericsson has announced a system for automated provisioning and management of devices incorporating embedded SIMs (eSIMs). This could help its operator customers to retain control of these devices, even though an eSIM can be provisioned by non-telcos and so enable users to move from one network to another. It could also, of course, allow Ericsson to seize opportunities to provide device management platforms for enterprise and Internet of Things networks, bypassing the MNO altogether.

The eSIM has been a source of great controversy in the mobile industry for years now. The operator body, the GSMA, led standardization, aiming to shield its members from the obvious threats of losing their chief instrument of user control, the MNO-provisioned SIM card. The operators had to recognize the need for an eSIM, to support the huge numbers of devices expected in the IoT, which could not realistically be provisioned manually as current handset SIM cards are. But they quickly saw the threat to their traditional business models, as companies from the IT world, such as Apple and Google, drove their own definitions, while pushing eSIM into handsets and tablets as well as IoT end points. That raised the specter of operators losing control of their core customers, who would be able to move freely between networks on their smartphones.

That scenario hasn’t fully developed yet, but it is likely to do so in future, and the best way for operators to avoid being devalued is to leverage their extensive experience in managing SIMs and devices, by providing superior IoT back office capabilities to those of non-telco alternatives such as cloud companies or, indeed network vendors. Although Ericsson has sometimes sidelined its own operator clients to work directly with enterprises on connected car or IoT projects, in recent years it has been less willing than Nokia to go direct, and insists it will only cultivate enterprise contracts in partnership with MNOs.

So, in announcing its new eSIM manager and secure entitlement server, it stressed that this would provide MNOs with a tool to improve their own revenue growth and their place in the IoT value chain. Monica Zethzon, head of solution area communication services at Ericsson, said: “The part that we’re doing is not the actual eSIM within the device. The piece that we have focused on is the remote management of the profile that you’re going to download. You need to automate the whole provisioning flow to access the right services in the network with the right data speeds and the right voice services.”

The GSMA’s standards cover the way to download a user’s profile to the eSIM, but Zethzon explained to FierceWireless: “What has not been standardized is how the data is provisioned to the network databases and all the credentials behind it. This is the missing part that’s been lacking from GSMA. Provisioning is always done by the server in the network.”

While the GSMA says it is working on standards for eSIM provisioning, those are not finalized and so operators are still using legacy processes designed for physical SIM cards, even when provisioning eSIM devices. Only with eSIM-optimized systems will they be able to offer customers the ability to order a device online and have it fully set up “in seconds”, as Ericsson put it.

That does not protect operators from customer fickleness when they make it so easy to swap networks, but assuming mobile consumers move towards dynamic pricing, and constant changes of platform (as in over-the-top video services like Netflix), at least they generate new revenues from managing the process – and in enterprise and IoT systems, that could apply to connections to any operator’s networks.

Ericsson was pointing out other opportunities which eSIM could bring to traditional operators, such as the potential to upsell customers to take more devices; and to more easily support special marketing promotions, trial periods or travel plans with flexible provisioning for temporary periods.

“The eSIM solution offers remote provisioning of user profiles and device management, key functions that enable CSPs to manage user profiles in a more flexible way,” said the vendor.

Ericsson is working with device manufacturers including Apple, Samsung and Google, and is in discussions with Microsoft. It claims that its research, a survey of about 200m users in five countries, indicated many consumers would pay extra for eSIM services such as flexible plans to cover holidays or special events. Based on the survey data, it estimates that eSIM smartphone users would increase their spending by 10% to 15%, particularly by adding new devices easily.

Analysts at Ovum, in the new ‘eSIM Device Sales Forecast Report: 2019–24, predicts that in 2020, 5% of all smartphones will be eSIM-based, and this will rise to 20% in 2024.

Late last year, the GSMA was forced, following a US Justice Department (DoJ) investigation, to open up to more input from non-operators into its eSIM specifications. Following a two-year probe, the DoJ concluded that “the GSMA and its mobile network operator members used an unbalanced standard-setting process, with procedures that stacked the deck in their favour, to enact an RSP Specification that included provisions designed to limit competition among networks”.

The GSMA has drawn up revised procedures which ensure that non-operator inputs are incorporated more easily, addressing some  of the DoJ’s concerns about restricted competition for end users. The Department has sent a ‘Business Review Letter’ to the GSMA, accepting the voluntary remedies.

Even with the GSMA in the driving seat, the big device platform companies have been  using eSIM technology for their own ends. Google, for instance, proclaimed “the first major smartphone with eSIM”, its own Pixel 2, and followed in 2018 with the Pixel 3, which can switch between several operators’ networks.

Ralph Steffens, CEO of international MVNO Truphone, said of eSIM: “This new technology signifies a massive shift in the telecommunications industry. It’s having an impact on everyone from phone providers to chipset manufacturers to mobile network operators. But most importantly, it directly impacts businesses and consumers by offering them more flexibility over their mobile connectivity.”

Apple also included eSIM support in 2018 iPhone models, prompting ABI Research to increase its forecasts for the technology – it now predicts that 420m eSIM-compatible handsets will be shipped by 2022, 100 times higher than in 2017.

Google and Apple have both been laying the groundwork for a market in which the connectivity provider is virtually invisible to the user, and can be changed at will, as in WiFi. In 2014, Apple introduced an iPad with a ‘soft SIM’, providing a choice of operators which could be selected by the user online; and Google’s Fi MVNO allows customers to switch between Sprint, T-Mobile and WiFi networks.

However, the carrier-independent iPad is reliant on operators supporting this option. T-Mobile and Sprint do so, but others in the US do not, so Apple warns users: “If you buy one of these models at a carrier, the embedded Apple SIM might be locked to that carrier or disabled.” This may not matter for the relatively small tablet market, but sets a vital precedent for smartphones, no doubt prompting the latest action.

The battle has been brewing for years, and not just in the USA. One of the first major spats was centered on Europe, in 2010, and resulted in a victory for the large MNOs. In that year, Apple tried to bulldoze an embedded SIM card into the industry before it was ready, but was forced to retreat under intense fire from European MNOs, which threatened to refuse to sell an iPhone with a SIM card that Apple could provision remotely.

By 2014, when the eSIM iPad made its debut, times had changed. Operators had accepted that eSIMs would be essential to make it workable to support huge numbers of connected devices. Soon after, many had signed up for the GSMA’s eSIM effort – no doubt hoping that the specs would, at least, have carriers’ interests at heart if they were defined by the MNOs’ own association rather than the device segment.

But there is still a big leap for MNOs, to accept an unfettered handset, rather than seeing the eSIM in devices where they have less control anyway, like tablets, wearables and even cars. These items often do not usually come with their own cellular data plan, or they may be part of a bucket deal in which the primary billing relationship still centers on the handset – that bundle itself tying the user to the particular MNO.

Even then, some operators have resisted the change – Verizon sold soft SIM iPads with its own separate SIM, disabling Apple’s, though of course this is impossible with non-removable eSIMs, which started to appear in some devices, including the iPad Pro, in 2016.

But the smartphone remains the chief source of usage, revenue and opportunity for the operator to communicate with the user and promote other offerings – and that is Apple’s next frontier. A report by Strategy Analytics said: “Short of offering its own MVNO, from a carrier perspective an eSIM iPhone would be the most destabilizing change Apple could make to their existing iPhone business model. With an eSIM equipped iPhone a customer need never directly interact with an operator again, instead provisioning service and switching from carrier to carrier at the customer’s whim. Adding an eSIM to the iPhone would be a direct shot across the bow of carriers. With eSIM, Apple’s grip on the customer will become even tighter.”

Meanwhile, Deutsche Telekom has driven the development of nuSIM, an alternative to eSIM which eliminates the separate physical SIM card altogether. The German telco is working with various partners – mainly specialists in IoT chipsets and security – on the project, which aims to move all the SIM functionality from the physical card directly to the chipset, to support mobile IoT applications.

nuSIM is specifically focused on low cost IoT devices with a long lifespan, such as asset trackers or smart motion or temperature sensors. Getting rid of the physical SIM card will simplify the form factor of a low power device and reduce its cost, package size and likelihood of failure. It will improve battery life still further and also remove the need for the logistical activities associated with SIM cards, such as inventory processing.

DT said nuSIM would provide a common set of specs to enable “minimum hardware and software footprint for cost-efficient implementations with minimal power consumption”. The operator’s credentials would be placed on the device at chip level during manufacture, using a simple and standardized digital process, the telco continued.

Last month, it was announced that nuSIM had been chosen by Qualcomm for use in its 9205 LTE modem, which supports NB-IoT, LTE-M and 2G IoT connections. Huawei’s chip subsidiary, HiSilicon, followed suit, using nuSIM in its Hi2115 NB-IoT system-on-chip, and demonstrating the connection in a Quectel module, the BC95-G.