One of the hottest topics in any telecom-related conversation right now — and a key point of discussion in the upcoming 2022 Telecom Industry Address—is the carrier support for eSIM phones and devices.
At the recent launch of the iPhone 14, Apple announced that the newest iPhone model (in the United States only, for the time being) would have an embedded SIM, or eSIM, and would not have a physical SIM card tray. Consequently, iPhone users who want to upgrade to the newest model will need to have a rate plan with a carrier that supports eSIM technology.
From a consumer standpoint, the benefits are clear. eSIM technology:
- eliminates the need for handling fiddly SIM cards
- allows for smaller, more lightweight devices
- is easier to activate
- allows users to switch between different carriers (including international carriers when overseas) at the touch of a button.
However, this news was less welcome most North American carriers, who face challenges in implementing support for eSIM. Analyst firm Global Data has said that this announcement is “a disaster for ill-prepared carriers”. Given the hurdles this technology poses to carriers, it’s no wonder that the eSIM standard was first launched in 2016, with the first eSIM-capable iPhone following in 2018, but the telecom sector is yet to fully embrace it.
Currently, T-Mobile is the only major network operator supporting eSIM, a capability that they announced less than three weeks prior to the iPhone 14 launch. T-Mobile’s marketing of the feature downplays eSIM’s capability to easily switch carriers, instead focusing on benefits to consumers who either want to use both their work and personal numbers on a single device, or set up an international carrier on their existing device for extended stays outside of the United States.
Device manufacturers, in contrast, have long been on board with eSIM. In 2021, there were:
- 57 smartphone models with eSIM on the market, more than half of which support 5G
- more than 3 billion subscribers in 82 countries who used an eSIM service.
What are eSIM’s key challenges for carriers?
Given that eSIM has broad penetration outside of North American — with many eSIM models already on the market — why are carriers struggling to embrace this technology? The answer is largely because of the game-changing disruption to their existing business models, along with other challenges.
- Low consumer awareness and demand: Although eSIM is seeing increasing adoption globally, according to GSMA Intelligence’s March 22, 2022 report on the state of eSIM, consumer awareness of eSIM in 2021 was at 27% in the United States. With such low awareness, it’s not surprising that network providers have felt a lack of urgency.
- Ever-higher telecom churn rates: telecom service providers in the United States have an industry churn rate of 22%—resulting in 95 million customers changing carriers each year. The telecom industry has historically struggled with low customer loyalty levels, and the increased market competition has only fueled that trend. In 2021, the telecom sector had a Net Promoter Score of 31 – the lowest of all industries measured. Implementing eSIM technology would make it easier for customers to switch providers, which would only increase customer churn.
- Carriers are want to protect their roaming revenue, which has only just recovered from COVID losses: the global pandemic drove a massive 73% decrease in global roaming subscribers from 2019 to 2020. The recovery in roaming revenue had only just started to hit its stride this year. Many analysts have predicted, however, that the Apple eSIM announcement will be the end of roaming revenue altogether.
With the plethora of eSIM capable phones already being produced by device manufacturers, it will be interesting to see which companies follow suit. Either way, it seems that most US network providers will have to adapt and forge a new path forward if they want to hang on to customers upgrading to the newest devices.
This free 90-minute virtual keynote on Wednesday, October 19 at 11am ET will offer an unmissable overview of industry trends, 2023 forecasts, market disruptions, and key barriers the telecom sector is facing.