The Embedded SIM: How It Is Making the Customer King

I. Grant

I. Grant

Summary Bullets:

  • The long-term nature of industrial IoT connectivity is forcing carriers to consider the lifetime value of customers and adapt their pricing accordingly.
  • Enterprises are using ‘network unaffiliated virtual operators’ (NUVOs) to disintermediate MNOs and cut costs, and new SIM technology is helping NUVOs to optimize coverage for their customers.

As cloud and IoT become the dominant models for ICT, it is increasingly obvious that the networks are only a means to customers’ ends. Big beasts though they are, telcos are merely part of an ecosystem that supports customers. As such, the lifetime value of a customer who stays inside a telco’s ecosystem is higher than the one who churns after his two-year smartphone contract ends. Smart telcos are changing their business models to reflect this.

The industry is not changing for charity. It is being squeezed by new competitors and new customer needs. On one side are fashion-conscious phone owners who cannot live with the latest handset. On the other are firms that make and supply high-value, long-lived assets. GM, Volvo, BMW and others see value in staying in touch with customers after they drive off in their new connected cars. Actual car performance data can help design better cars, but the car makers are also making money selling driver and passenger behavior data to insurance companies and content providers.

The cost of connecting machines is becoming more affordable, opening this two-sided market to more players. Japanese electrical goods maker Panasonic is setting up a private global network to connect its different products. Although customers buy the machines, Panasonic offers an extra paid-for managed service that includes management reports and maintenance.

But, why would Panasonic consider setting up a private network? In fact, it didn’t; it relies on what some are calling a ‘network unaffiliated virtual operator (or NUVO). This is a company that specializes in connectivity wherever and however the customer requires it. An NUVO rents circuits and airtime from local operators and manages the resulting network on Panasonic’s behalf. Some examples of NUVOs include Transatel, Truphone, Cubic Telecom and even module maker Sierra Wireless.

The GSMA’s new specification for embedded SIM cards is a godsend for NUVOs. The eUICC specification allows the SIM to be updated with a new ‘profile,’ i.e., network connection, over the air. This means the owner of the asset can embed the SIM permanently into the device in the factory without worrying about long-term contracts with airtime suppliers. This gives NUVOs more bargaining power with fixed and mobile telcos because they are positioned to manage all connectivity, not just mobile, for the customer. They are ideally placed, for example, to program the device to seek and use the optimum signal with respect to cost, strength and reliability.

The telecom industry is fighting back with initiatives such as the software-defined WAN, exemplified by Deutsche Telekom’s nascent ngena. Mobile operators, perhaps buoyed by the success of LTE and the coming LTE IoT standards, are ever more willing to take the lifetime value of the customer relationship into account. The first step is to let enterprise and retail customers change their handsets sooner. This switch of their profit focus from product sales to the customer relationship is essential preparation for the IIoT, where the connected assets – such as smart meters, cars and trucks, or even vineyards – are likely more long-lived than mobile phones, but where profit margins may be thinner.

With operators increasingly willing to seek long-term relationships with customers, the scene is set for a stable (or improving) technology and cost environment, with the customer as king.

About Ian Grant
Ian Grant is a Senior Analyst for Enterprise Mobility Europe at Current Analysis, with almost 30 years' experience covering telecommunications and enterprise computing issues. Apart from following product and financial news about the supply-side companies, Ian has developed deep insight into how end users perceive what they are offered and how they make purchase decisions.

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