Digital Disruption in Telecom, Part 1: The Power Shift of eSIM and the Internet of Things

This is part one in a three-part series on digital disruption in the telecom industry. Read the second or third installments, and our whitepaper breaking down how operators can survive digital disruption.

The eSIM, as with many innovations, was born of necessity. By 2025, the GSMA predicts there will be more than 25 billion connected devices worldwide. And each device needs to be managed in some way. Imagine if a city owned hundreds of thousands of connected streetlights and each one had a physical SIM card—the economics of sending a technician out to change them every time something went wrong just would not stack up.

The growth of the Internet of Things and billions of connected devices led to the development of the embedded SIM card, or eSIM. Initially developed for machine-to-machine (M2M) use cases, the eSIM allowed enterprise clients to activate and manage SIMs virtually and remotely, without any physical interaction. Adding hundreds of thousands of devices as part of an IoT project could be done relatively easily and cheaply.

The eSIM has since made its way to the consumer space, with Apple and Google using the technology to shake up the smartphone market, as with the Apple Watch. But eSIM hasn’t only made it easier to provide connectivity to billions of consumer and enterprise devices. It will also make it easier to swap between connectivity providers altogether.

With eSIM, customers can switch between network operators without having to change their SIM card. Customers can select alternative connectivity providers according to their needs.

And by swapping connectivity providers, eSIM customers are of course swapping plans. If Carrier A has a better data plan but Carrier B has a better SMS plan, customers can choose when and how they use each provider’s network—or roaming offering. Customers will be able to have multiple vendors and multiple plans on one SIM, whether it be in their smartphone, tablet or on their TV.

This is not what network operators intended when introducing the eSIM. Originally intended to stay in the enterprise space with M2M, eSIM is set to completely disrupt the consumer smartphone market. Network operators earn between 70 to 85 percent of their revenue from B2C—but now that revenue is being put at risk. Enterprise IoT revenue is also at stake, with larger companies with billions of IoT devices able to switch at their leisure.

Operators have tried to counter this eSIM emergence by creating locked eSIMs, but as smartphones have become more affordable and are available out-of-the-box with built-in eSIMs, operators can only resist the change for so long. So how can network operators respond to the shift in power, as consumers will be able to control when and how they can switch their plans? Well, they won’t be able to properly respond until they consider two more trends, revealed in our blog post next week.