1. Regulatory Implications from the Introduction of the eSIM
Victoria Falls, Zimbabwe
2017
Simon Molloy

2. Agenda Evolution of the SIM Card
Disruptive Business Models enabled by the New Generation SIM Evolution
Likely timeline for eSIM adoption
Regulatory Issues and Responses

3. Evolution of the SIM Card
Since its deployment in the early 1990s, the SIM card has provided secure, identifiable and authenticated access to mobile networks
However, the traditional form of a physical, removable SIM card has become dated as technology advances – with a range of manufacturers including Apple, Samsung and others developing a range of products which move to eSIMs (particularly wearable devices)
Three types of ‘new generation SIMs’ have emerged in this process, namely:
Embedded SIM or eSIMs: a physical SIM that is permanently embedded in the devivce
Remote Provisioning ‘reprogrammable’ SIMs: SIM that can be removed from the device (e.g. Apple SIM)
Soft SIMs: collection of software applications and data that resides in the memory and processor of the device

4. Evolution of the SIM Card
Examples of new generation SIMS
A soft SIM would merely replace the sealed and reprogrammable SIM with
software storage.

5. Evolution of the SIM Card
Examples – Wearables and eSIMs

6. Evolution of the SIM Card
A critical feature of all these new generation SIMs is remote provisioning technology
This gives the consumer and/or supplier the ability to remotely change the SIM profile without having to physically change the SIM

7. Evolution of the SIM Card
To cater for growth in this area, in June 2016, the GSMA released its final embedded SIM specification for the M2M market, which was supported by 40+ players
This provides a single, de-facto standard mechanism for the remote provisioning and management of M2M connections, allowing the ‘over the air’ provisioning of an initial operator subscription, and the subsequent change of subscription from one operator to another
Phase 2 of the GSMA SIM standard, which allows for devices to be connected to the cellular networks without a smartphone, is due in late 2016 and will be released soon.

8. Disruptive Business Models enabled by the new generation SIM Evolution
The traditional SIM is an efficient mechanism to lock a customer to an operator (albeit weakened by SIM swapping, multiple devices and MNP if available).
The widespread introduction of the eSIM and Remote Provisioning technology is therefore likely to be an enabler for disruption, with the new technology:
Decoupling the handset and therefore the customer from the network and the operator
Giving device owners an enhanced ability to compare networks and select service at will directly from the device
Providing opportunities for consumers to choose networks based on criteria such as cost, network speed and quality

9. Disruptive Business Models enabled by the new generation SIM Evolution
Key areas where MNOs are likely to see disruption
Cost
Potential lowering of retail and distribution costs with fewer requirements on operators to separately purchase & distribute SIM cards or wear the SIM tax.
Customer Churn
As it will become easier for a consumer to switch, price competition may become the key differentiator. A consumer could keep multiple operator packages for use in different locations within a country
Billing
IoT devices which will be billed to enterprises directly and/or through speciality IoT service providers. Other billing no change.
Marketing & sales
The ease of use and ease of operator switching has the potential to weaken the MNOs position in the mobile value chain
Roaming
e-SIMs will enable a virtual SIM-swap for the travelling consumer.
Numbering
Currently ‘MNCs’ and numbers are allocated only to MNOs. It is very likely in the medium or long term – extra-territorial E.212 identifiers will be used for IoT/M2M. MNP is not an issue for IoT but it may allow enterprise porting.
Customer touchpoints
e-SIMs eliminate the need for customers to go to a store and acquire a SIM card when signing up for service.
Prepaid v. contracts
Pre-paid markets may be less impacted as consumers already fluid.

10. Disruptive Business Models enabled by the new generation SIM Evolution
Disruptive Business Models enabled by new generation SIMs
MVNOs
New generation SIM technology in handset devices will likely be a leveller of competition between MNOs and MVNOs, as the barrier for switching is reduced.
The proliferation of e-SIMs is likely to create a ‘spot market’, with remote provisioning technology allowing the device to dynamically switch between several networks according to cost, congestion and signal strength. This process could be managed by the users or a 3rd party such as an MVNO.
An MVNO that takes advantage of this would clearly be a formidable competitor. MVNOs contracting with several network operators could offer a tariffs without disclosing to consumers which network is providing services.   
Manufact-urers of IoT devices
Manufacturers of IoT devices have the ability to embed a blank e-SIM in the device that can be activated on any network in any country provides manufacturers with the opportunity to take control of the relationship with the consumer, leading to the disintermediation of network operators.
OTT Service Providers
OTT voice and messaging services who rely on available internet connectivity to provide their services will greatly benefit from remote provisioning technology as it will offer a smoother ‘handover’ between differing operators, meaning that the service provided is more consistent with less drop outs

11. Likely Timeline for eSIM adoption
It is expected that eSIM adoption will have a slow start
In 2017, deployment will mostly be proving the concept to allow operators and device manufacturers to gain experience of eSIM practicalities and refine implementation and processes
The market will then ramp up in as cost, industry value-chain, user-experience problems and regulatory issues are progressively resolved
It is anticipated that by 2020, close to 1 billion mobile and IoT devices will ship with embedded, remotely-provisioned SIMs annually

12. Regulatory Issues and Responses: SIM card registration
SIM card registration is the process of recording and verifying mobile phone number(s) and personal information of a subscriber by a communications service provider.
eSIMs pose a potential problem for identification purposes as it removes an avenue for identification by eliminating the need for a consumer to buy their SIM card in person
While there are various remote provisioning approaches – the optimal approach to the registration and authentication of eSIM card and soft SIM in IoT/smartphone devices has not been resolved in any global market.

13. Regulatory Issues and Responses: Supporting Enhanced Competition
An exemplar regulatory regime which supports enhanced competition is likely to have the following features:
Mandating/Licensing of MVNOs instead requiring all MVNos to come to commercial arrangements with licensed MNOs.
Facilitating streamlined eSIM registration processes for both industrial use to IoT/M2M devices and smartphones subject to the resolution of interception and national security issues
Permit eSIM registration processes to be ‘portable’ across operators/MVNOs
Regulatory regime provides a transition scheme for an environment of users with physical and eSIMs including registration of physical SIM permits eSIM registration

14. Regulatory Issues and Responses: Supporting Enhanced Competition
An exemplar regulatory regime which supports enhanced competition is likely to have the following features:
No special or other licensing required by eSIM providers (if any develop) for the enterprise market or beyond;
Permit electronic re-verification of eSIMs (rather than physical checking) this could utilise on two factor authentication (‘2FA’) provided by inter alia Singapass or iSignthis; and
Facilitate access to regulated financial services following eSIM registration etc. in order to promote financial inclusion etc.

15. Questions

16. Thank You
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