The disappearing SIM

If there is one piece of telecom real-estate that the operator still has a strangle hold on then it is the end customer – and the little SIM card holds all the data of the customer. Interestingly enough, that as the smart-phones continue to grow in size (some of them would definitely not fit in my pocket anymore) the SIM card appears to be following a different trajectory all-together. Apple again has been the undisputed leader in this game with the introduction of first the micro-SIM and now the nano-SIM.

 

Reproduced from Wikimedia Commons

To be clear here, currently this has not led to any dramatic impact upon the capabilities of the SIM. Advances in technology continue to ensure that more and more information can be squeezed into a smaller and smaller footprint. And although there have been claims that the main purpose was elegance in design and to squeeze more in the limited space that exists I do wonder if there is a long term strategic motive in this move.

Let us revisit the SIM once again; in the broader sense it is a repository of subscriber and network information on a chip. In the modern world of the apps, cloud services and over-the-top updates is there any real USP of having an actual piece of hardware embedded in the phone? This is not a revolutionary thought – in fact Apple was rumored to have thought about it a couple of years ago – and was working towards a SIM-less phone. This concept is not new – some interesting notes about how this could look like can be found back in 2009. From what I gathered was that at that time a strong united ruckus from the carriers dissuaded them from continuing the path.

Two years have passed since then, and you continue to see continued margin pressures from the operators while folks such as Apple and Samsung continue to be the darlings of Wall Street, and well – the SIM card gets smaller and smaller. How does that impact the operator – well for one, if the operators continue to bank on the actual chip as their own property perhaps this advantage would continue to slip away. This is increasingly important since although the SIM could get smaller to accommodate the traditional functions of a SIM – if you then add in other potential functionalities such as payment, security etc then at some point you do need additional real estate to include these functionalities. And at that time if the SIM is just too small, and there are a large number of handset manufacturers (who customers want) who design to this nano spec then well – the operator is out of options.

However, this ‘creative destruction’ as coined by Schumpeter is perhaps the trigger that the telecom operators need in the first place. The E-SIM is perhaps not the end of the game for them, but the advent of a new start. This would be one where software triumphs over hardware – where functionalities are developed and embedded upon multiple operating systems and customized based upon the each individual device and user capabilities. Here rather than mass producing SIMs and having processes to authorize and configure systems users could take any phones and get registered over the air, have capabilities dynamically assigned and configured to suit their specific need. In some ways – it would be the era of mass customization, which can be done efficiently, easily and seamlessly.

It would definitely be a different ball-game, and I can only speculate which way the ball would spin – but perhaps it would be in their own interests for operators to willingly embrace such a transformation rather than push back – the opportunities might simply outnumber the risk.