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Consumer Electronics Devices

Apple Shakes up Mobile Space with eSIM Support

One of the most exciting announcements during the Apple Event today centered around the introduction of eSIM technology into the new iPhone XS and XS Max. eSIMs act as a replacement for a traditional physical SIM card - they save internal space, improve water resistance, and allow users to configure their phone's network connection without having to request, wait for, and then physically insert a SIM card.

In 2016 and 2017, eSIMS began gaining traction in the consumer market with the launch of tablets and smart watches by Apple, including the iPad Pro and Apple Watch Series 3's cellular model. Google's Pixel 2 was the first smartphone model to offer eSIM support, but without support from the carriers its eSIM only worked on Google's own Project Fi service.

Apple's new iPhone XS series phones change the game. Both the XS and XS Max offer dual SIM support, with the second SIM offered via eSIM. An array of the largest carriers worldwide have signed on to support the eSIM – including AT&T, Verizon, T-Mobile, Vodafone, Deutsche Telekom, Jio, Bell, and others. Consumers who buy an iPhone XS will be able to sign up for cellular service or switch cellular providers more quickly and easily directly on their phone itself. According to Apple, users simply need to scan a QR code from their cellular provider in order to configure the eSIM and have a connection. This will allow users to more easily set up their mobile service, as well as more easily change cellular providers.

One Caveat

While AT&T, Verizon, and T-Mobile have promised to support Apple's iPhone XS eSIM technology, we don't know exactly what that will look like. Turning to the example of the iPad Pro, consumers who purchase their phones directly from Apple are likely to receive full eSIM functionality and will be able to use the eSIM to access any partnering network, but those who buy directly from the carriers (most consumers in the U.S.) may find this functionality fully or partially locked.

Some carriers that sell eSIM-enabled iPad Pro models have disabled the eSIM or locked it to their own network. Consumers who buy directly from Apple or from a third party retailer – instead of from a carrier –  receive full functionality and are able to choose cellular plans on the iPad Pro itself from carriers in over 180 countries and regions globally via a digital storefront. These plans include pay-as-you-go options from Apple's partners GigSky and AlwaysOnline Wireless, via the Settings app.

iPad Pro eSIM Support

· Carriers that have disabled the eSIM: Verizon

· Carriers that have locked the eSIM to their networks: AT&T, AU, NTT DoCoMo, Softbank, KDDI, EE, Deutsche Telekom

· Carriers that have retained full eSIM functionality: T-Mobile USA

· Carriers that support Apple's eSIM on their networks: AT&T, T-Mobile USA, Sprint, EE, Three, AU, NTT DoCoMo, Softbank, KDDI, EE, Deutsche Telekom, GigSky (MVNO), AlwaysOnline Wireless (MVNO)

The Implication

Historically, carriers have been concerned about supporting eSIMs on their networks. They worry about a possible rise in churn if consumers are able to very quickly and easily change providers. In the case of the iPad Pro, carriers have addressed this risk by restricting eSIM functionality and locking the devices to their own network.

There is a second worry on the part of carriers. They are concerned about the potential for a phone manufacturer to displace them in their relationship with consumers: for a customer to be able to buy their phone, open an app, and choose from any one of a number of listed networks - and possibly having to pay a fee or a cut of the mobile subscription for being listed as a network in the first place.

Parks Associates’ CE Adoption and Trends study finds that the iPhone has reached 50% of the total smartphone installed base in U.S. broadband households. Apple's dominant position as a smartphone manufacturer, its large retail store base, and its strong relationship with its customers have to be very concerning to carriers.

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