Consumer eSIM not likely to happen soon!

The US Department of Justice is has opened a probe into alleged coordination by AT&T, Verizon Communications and the GSMA, accused of having slowed down the adoption of eSIM standards. When adopted in consumer handsets, eSIMs would allow subscribers to switch between mobile network operators more easily than when they have to purchase a new physical SIM card. Verizon and AT&T together represent 70% of the wireless subscription market in the US.

While the original eSIM concepts started as early as 2010, the technology has yet to be adopted on a large scale in consumer devices. Gemalto reports that Jean-Christophe Tisseuil from the GSMA recently stressed that M2M and consumer eSIM dynamics are very different although they rely on similar provisioning and activation architectures.

On the other hand, eSIMs have proven their efficiency is solving logistics issues for the IoT market. The specifications for Subscription Management are already adopted across markets in the IoT field, allowing devices to go cross borders seamlessly for the end-user.

Most analysts in the industry agree that if mobile handsets were to start now, they would not include removable SIM cards but rather rely on a combination of security aboard the handset (such as with a minimal secure element) combined with a cloud authentication. As says Gemalto, “the transition towards eSIM is inescapable.” Next battle to be fought is the standardization of user authentication methods in 5G. Already, it is envisioned that different authentication methods will be acceptable depending on the need for security associated with each application.

According to The New York Times, the DoJ investigation has been opened about five months ago after at least one device maker and one wireless carrier filed formal complaints with the US Department of Justice. The New York Times adds: “Apple and other equipment makers have complained to the Justice Department about wireless carrier practices related to eSIM technology, two sources familiar with the matter said. Apple declined to comment.” Also, according to ZDNet, the DOJ has reportedly requested information from all four US wireless carriers, including Sprint and T-Mobile. The DOJ reportedly looked into the same issue in 2016, says Fierce Wireless, but closed the investigation without taking action.

Verizon plays down the issue saying: “the reality is that we have a difference of opinion with a couple of phone equipment manufacturers regarding the development of e-SIM standards. Nothing more.”

An AT&T spokesman said in an email to Reuters: “Along with other GSMA members, we have provided information to the government in response to their requests and will continue to work proactively within GSMA, including with those who might disagree with the proposed standards.”

The GSMA issued a statement saying: “The GSMA, working with leading mobile operators, device makers and SIM manufacturers worldwide, is facilitating the development of a universal standard for eSIM that will be deployed globally. This standard contains a wide range of features, including the option for the eSIM to be locked. (…) The development of the latest version of the specification is on hold pending the completion of an investigation by the United States Department of Justice. The GSMA is cooperating fully with the Department of Justice in this matter.”

As is evidenced in our Smart Insights Report, the switch to eSIMs in consumer devices is favorable to Subscription Managers regardless whether this role is impersonated by handset vendors, the GAFA or other third parties. Conversely, the switch to eSIMs is detrimental for the classical MNOs which are at risk of losing the consumer relation and be reduced to the role of data pipes.

What is happening now with this DoJ probe and the fact that the GSMA is putting standardization on hold is just the latest episode of the ongoing battle between MNOs and handset vendors.