Kate O’Flaherty asks if operators are more focused on possible downsides for them, rather than experience upsides for their customers?
Today, there are 1.2 billion eSIMs installed in connected devices, and that number is set to surge to 3.4 billion over the next three years, according to analyst Juniper Research.
Powering smartphones through to IoT devices, eSIM has multiple benefits, including flexibility, reliability and security. Many flagship smartphones support the technology and common frameworks by mobile giants Apple and Google are helping to fuel its growth. So why are operators being so slow to embrace eSIM?
On the surface, mobile operators’ concerns are obvious. eSIM allows customers and users to easily switch provider, making it difficult to prevent churn. The costs for operators can be high, and introducing eSIM can be technically complex – especially in the IoT space where a need for wireless technology combined with hardware and management tools requires specialist vendors.
In the consumer market, eSIM makes it easier for customers to change provider, which can bring downward pricing pressure. This makes it a threat to operators, says Kester Mann, Director of Consumer and Connectivity at CCS Insight.
In addition, says Mann, “The technical side can be complicated and difficult, and device support is an issue: Only a limited number of devices include support for eSIM.”
While eSIM has a positive impact on manufacturing costs, it is being introduced in newer flagship smartphones first, and these are more expensive, says Peter Jarich, Head of GSMA Intelligence. However, he points out, the dynamic will change as companies such as Apple and Google introduce cheaper eSIM devices.
The Covid-19 pandemic has been another obstacle to adoption, slowing eSIM launches in the second half of 2020, GSMA data shows. Some operators have delayed their eSIM implementation projects to focus on key priorities, such as mobile network resiliency, according to Jarich.
Drivers for eSIM
Adoption has slowed, but eSIM isn’t going to fade away: vendors operating in the space say the drivers are in place for the technology to take off. This doesn’t have to be complex, because most operators already have access to subscription platforms via their existing SIM vendors to allow them to deliver consumer eSIM, says Hamish White, Founder and CEO of eSIM as a service provider Mobilise.
He points out that “all major SIM vendors – including Thales, Giesecke & Devrient and IDEMIA – have eSIM platform offerings”.
In addition, global standards for eSIM set by the GSMA are already available. “The common eSIM integration specification means there are no barriers for operators in specific countries,” White points out.
Taking this into account, White thinks one reason operator uptake is slow is because the technology can facilitate easier switching to competitors. He points to “a general lack of focus on customer experience improvements, such as in-app eSIM provisioning among operators; prioritising other product implementations deemed to have a higher business priority; project backlogs; and lengthy delivery cycles”.
There is also a challenging certification process for operators to navigate, and setting up the customer onboarding process can be difficult. Onboarding eSIM customers typically happens in two ways – using a QR code or a mobile app, says White. “For a superior customer experience, using an application is by far the better choice, since customers can activate their subscription in just one quick tap.”
However, while launching an app is simple for customers, it’s complex for operators. The GSMA has cooperated with application marketplaces such as Apple’s App Store and Google Play to create a regulated process for launching in-app eSIM offerings. But in-app eSIM provisioning depends on an API called a local profile assistant, which operators can only access once they prove their compliance with the subscriber management system provider.
The situation is even more complex due to the differences between Android and Apple applications. “This regulatory minefield, paired with a complicated, lengthy process adds to hesitation to adopt eSIM technology,” says White.
He says this complexity means it can typically take up to a year in normal circumstances to create a GSMA-compliant eSIM solution; even longer since the pandemic.
If operators are to embrace eSIM soon, especially in large scale IoT, changes will need to be made. Today many 3G and 4G mobile operators own their SIM management platform. If a user has to switch to a different service provider, the ecosystem can deny moving the IoT device from one wireless network to another, says Vijay Anand, Assistant Vice President, Technology, and Chief IoT Architect, Capgemini Engineering.
He says it can make the management of large IoT deployments “chaotic, complex and potentially costly”.
Taking this into account, Anand thinks there is a need for every eSIM supplier to have a common management platform. “The platform can support multiple operators to keep the connectivity process as simple as possible.”
Slow adoption is frustrating for manufacturers, which want operators to embrace eSIM, but it’s not going to happen overnight. While 80% of manufacturers and 90% of operators say they will offer eSIM by 2025, operators want to embrace eSIM as a hybrid model, according to a recent study by Truphone and Mobile World Live.
This is partly due to supply chain issues: Operators cite availability as a key barrier to implementing the technology, with 48% claiming it is a challenge second only to cost.
The churn concern
There are obstacles to adopting eSIM, but churn should not be operators’ main concern. In fact, eSIM makes it more important to differentiate through the customer experience, which many operators are already doing.
“Offering a superior customer experience through eSIM outweighs the risk of increased churn by providing customers with a more tailored solution that meets their digital needs,” White says.
And disruptive operators could even adopt the technology as a churn reducing factor, says Mann. “Or maybe those that feel they have a premium network may use eSIM to encourage people onto their own network,” he suggests.
It won’t happen straight away, and that’s partly because 80% of consumers aren’t aware of eSIM, GSMA data found. “Raising consumer awareness of eSIM and explaining and promoting its benefits is key to driving market adoption,” says Jarich.
It’s not just down to mobile operators – the industry as a whole has an important role to play.