Its power with carriers growing, Apple may one day build e-SIMs into iPhones

Apple might one day remove the hassle of dealing with SIM cards by baking a standardized e-SIM into iPhones. It would be a bold power move in its relationship with carriers, but consumers would almost certainly benefit.

Apple already has some history with a neutral SIM card. In the U.S. and U.K. Apple sells the iPad Air 2 and iPad mini 3 with their own “Apple SIM” included.

[aditude-amp id="flyingcarpet" targeting='{"env":"staging","page_type":"article","post_id":1816191,"post_type":"story","post_chan":"none","tags":null,"ai":false,"category":"none","all_categories":"business,mobile,","session":"C"}']

So, rather than having to switch out the SIM when travelling overseas, for example, customers can just select a new plan from one of Apple’s partner carriers, and they’re done.

The Apple SIM isn’t a true e-SIM. It’s not baked into the device. It’s a removable piece of plastic that can be taken out and replaced with a nano-sized SIM from a wireless carrier.

But it was a big first step toward a real embedded e-SIM, which, for the user, would make changing carriers as simple as a few taps in the device settings.

Apple may be readying itself to go all the way, even though the wireless carriers have, for years, railed against the e-SIM. In fact, AT&T in 2014 rebelled against the Apple SIM by locking it to AT&T service permanently when the user activated the device.

Apple and carriers: It’s complicated

In the evolving relationship between big phone OEMs (original equipment manufacturers) and big wireless carriers, the OEMs have become bigger because of consolidation, and have gained more bargaining power with carriers.

Because of massive iPhone sales around the world, Apple is arguably the phone maker with the most power.

“The only force strong enough to push back against the carriers, particularly here in the US, is Apple,” said Sina Khanifar, cofounder and adviser at OpenSignal ,and tech fellow at the Electronic Frontier Foundation. “With such a dominating market share, they’re often able to push around carriers, who need Apple devices in order to win subscribers.”

(Khanifar organized the grass-roots campaign that eventually led to Congress passing legislation requiring carriers to unlock phones if certain conditions are met.)

[aditude-amp id="medium1" targeting='{"env":"staging","page_type":"article","post_id":1816191,"post_type":"story","post_chan":"none","tags":null,"ai":false,"category":"none","all_categories":"business,mobile,","session":"C"}']

Apple seems willing to flex its muscle if it can improve any part of the iPhone users’ experience.

The fact that Apple has started it own device financing program is proof of its unprecedented power, and proof of its willingness to make moves that are clearly against the interests of carriers. Carriers offer their own financing options, and have for years, if you consider that subscribers have always paid high device financing charges built into their monthly bill.

Attitudes are changing

And consumer attitudes about buying phone service are changing, creating an environment in which the e-SIM makes sense.

“The consensus of key indicators shows that the subsidy model, with contracts, is rapidly unwinding,” said  PricewaterhouseCoopers‘ telecom practice lead Dan Hays.

[aditude-amp id="medium2" targeting='{"env":"staging","page_type":"article","post_id":1816191,"post_type":"story","post_chan":"none","tags":null,"ai":false,"category":"none","all_categories":"business,mobile,","session":"C"}']

“You really have a perfect storm with so many people buying or financing phones, and with the OEMs gaining some power” he added. “We’re really starting to break through some of the obstacles in the wireless value chain, and eSIMs are a part of that.”

According to Hays, some in the industry believe we’re moving toward a dynamic pricing model, in which a person might use data service from one carrier in the morning and another carrier in the afternoon, depending on which has the best speeds and prices at those times. He calls this “SIM arbitrage.”

Carriers, Hays explained, might be willing to sell wireless service at lower prices when they have a lot of network capacity going unused.

Today, most wireless carriers aren’t known for their dynamism, and have a habit of inserting friction points in the experience of buying wireless, as a means of protecting profits.

[aditude-amp id="medium3" targeting='{"env":"staging","page_type":"article","post_id":1816191,"post_type":"story","post_chan":"none","tags":null,"ai":false,"category":"none","all_categories":"business,mobile,","session":"C"}']

That’s why the carriers began using software locks to form an exclusive bond between the device and the wireless service. The carriers fear that a standard e-SIM might make it too easy for subscribers to jump to competing networks.

Not about the carriers anymore

And it’s not really about the carriers, anyway. Consumers don’t have to buy their phone from a carrier anymore. They have options. They can buy directly from the phone maker, carrier website, pre-owned market site, carrier store, online retailer, or at a big box store like Best Buy.

“Apple has their own perspective on the relationship between consumers and their cellular devices,” said Khanifar.  “Users are buying an iOS device, and that comes first, not the cell service.”

An Apple-controlled e-SIM might come with its own set of questions, he added. “That firmly positions Apple as an intermediary between a user and their cell service.”

[aditude-amp id="medium4" targeting='{"env":"staging","page_type":"article","post_id":1816191,"post_type":"story","post_chan":"none","tags":null,"ai":false,"category":"none","all_categories":"business,mobile,","session":"C"}']

For the devices containing an Apple SIM today, users are asked to choose from a set of carrier partners who provide data service. In the U.S., it’s a short list, including AT&T, Sprint, T-Mobile, and GigSky — but not Verizon. And while an Apple SIM can connect to networks in 90 countries, Apple says, the choice of networks in those places may be limited to one or two.

“What if a user wants to move to a different carrier?” Khanifar asked. “What if a user wants to use their Apple device with a carrier that Apple hasn’t sanctioned?”

“It begs the question: Is the new boss the same as the old boss?” he asked. “If the SIM card disappears and isn’t replaced by an open and interoperable software-based standard, it’ll be bad news for consumers.”

Khanifar said the answer is a standardized SIM card system. He said such systems, even with software locks, have worked well for consumers around the world.

[aditude-amp id="medium5" targeting='{"env":"staging","page_type":"article","post_id":1816191,"post_type":"story","post_chan":"none","tags":null,"ai":false,"category":"none","all_categories":"business,mobile,","session":"C"}']

The last we heard about a serious effort in that direction was the news in July that Apple and Samsung were working closely with the GSMA to develop an e-SIM standard. Results of that work have yet to surface.