Will Apple switch the iPhone to eSIM-only everywhere by ’24?

With the arrival of the iPhone 14, Apple has only sold smartphones with eSIM support in the US. But that may be about to change. At least one analyst thinks Apple plans to extend eSIM use to Europe and some Asian markets by next year, when SIMs will be removed from its devices.

eSIM for the rest of us?

We’ve expected the move since Apple began with eSIM inside the iPhone in 2018, though consumers have complained at the complexity of setup in the US. In part, these challenges reflect inconsistent approaches to the tech across mobile carriers, but there could be a reason for that — particularly if Apple and Google begin to try to monetize carrier choice on new devices.

Speaking to Light Reading, Omdia analyst Dario Talmesio shared his speculation, and suggested how wider eSIM adoption could affect mobile carriers and consumers:

• For device makers, Apple in this case, removal of the SIM makes it possible to use the liberated space for other components and services.
• Mobile carriers become able to compete for customers on the device, not just online and the high street.
• Competition between carriers becomes more intense, in part because services can target customers directly.
• User churn could rise because it becomes easier to switch providers.
• Prices could drop.
• Apple (and Google/Android) might act as gatekeepers on mobile contracts, levying fees.
• eSIM’s could give Apple a chance to become an MVNO (Mobile Virtual Network Operator), competing with existing carriers.
• And eSIMs will be mandatory as carriers seek to support emerging markets such as wearables, vehicles, and more. (Apple Watch carries its own eSIM.)

Are there other benefits?

Along with the convenience of using one device for multiple lines, the obvious benefits to eSIM on an international scale for consumers is that they can look forward to competitive sign-up deals as carriers combat churn. That might translate into lower prices, but could also turn into additional inducements such as free access to Apple Music, accessories, or robust quality-of-service levels.

Talmesio speculates wider eSIM adoption might also lead to the evolution of automated switching services, in which consumers are automatically signed to new deals based on factors they see as important — price, coverage, data allowance, etc.

Despite potentially increased competition, there are benefits for carriers, too. As they evolve from business models based on network provision toward becoming complex network-based service and integration providers, additional services such as private, secured 5G communications across companies could become easy to access.

Another benefit for business users: in tandem with tweaks to Apple’s existing MDM ecosystem, it might become possible to remotely equip managed devices with business-only second lines during setup.

After all, if there’s a carrier store supported by eSIMs on iOS, then that presumably means carriers can be provisioned via API. For business users and business services, an on-device network provision store could help them reach the high-value corporate clients most high-end (and expensive) network service providers crave.

How can Apple make money selling contracts?

Apple could combine competing mobile services into its own store within the setup screen. This would make it easy for customers to port their existing number from their old device to a new one and offer the opportunity to shop for the best carrier deal. You already see something like this during the setup process for eSIM-enabled iPads.

The process might include a selection screen in which users could define what they want from their network from a menu of available services. Sign-up could take place on-device and payment/subscription could be taken via Apple Pay (and soon other third-party payment services).

Later, if a user wanted something different from their service, a new carrier would be a couple of clicks away — subject, of course, to carrier lock and slow number transfer provision.

A second option might be to leave customers with their existing carrier, but make a bigger bid to offer up second lines during the iPhone setup process. iPhones can currently support multiple eSIMs, with only two active at any time, but it’s uncertain the extent to which the dual SIM capacity is being used. Encouraging take up would give customers a chance to switch between networks at will, thanks to the eSIM. You might have an all-in-one data bundle with one service and a free image-sharing service on the second and an automation to make the switch process friction free.

In either case, Apple takes a fee.

Now, anyone watching Apple’s business knows the size of the cut it takes is very much under review. I think it will end up becoming 15% — regulators won’t deny Apple’s right to make money, though they will tweak its approach. At some point, an acceptable amount will be agreed.

Can Apple become its own mobile carrier?

With eSIM and a network access store, Apple could set up as an MVNO in some key territories. If it does, the most likely route will be through agreement with existing carriers to provide bandwidth and coverage while supplementing this with its own services.

It could supplement traditional carrier services with its own unique satellite-based services as its arrangement with GlobalStar expands. It’s worth paying particular attention to those arrangements, particularly as Apple makes its inevitable moves toward 6G.

Offering supplemental services alongside agreed partnerships might be the least-risky way Apple may be able to approach becoming an MVNO. The challenge is that Apple would need to ensure competing services aren’t overshadowed by its market size and if it makes its service available as an option during setup, it’ll have to tread lightly around competition law.

Apple is very much under regulatory review these days, and even a company that dances at the edge of legality for profit can’t expect too much leeway if it acts badly in the highly competitive, but strategically vital, carrier business. I actually think there’s too much complexity inherent in such an attempt. It’s most likely to finesse a more complex way to augment existing services in order to take a slice of network provision.

But, what about competition?

The problem is competition. By acting as a gatekeeper, Apple might find itself in position where how it offers the different networks is construed as market manipulation. This would swiftly generate investigation by regulators; carriers will not be silent if they find their business impacted.

In the UK, Ofcom in December took a look at this. It noted that eSIMs might enable Apple and Google to embed carrier selection within their apps and noted many of the positive potential benefits of doing so.

It also warned:

“Given the strong loyalty to iOS and Android it is also possible that Apple and Google would not face sufficient competitive constraints, which could allow them to charge mobile providers elevated commissions for prominence on their choice screen/app. If so, these commission costs would be likely to be passed, at least in part, onto consumers in the form of higher prices.”

This could also reduce choice, or influence it based on positions on setup screens. Providers unwilling to pay to be included might be excluded or placed below the fold.

Either way, eSIMs are the future

Ofcom concedes eSIM is coming. “Within the next five to 10 years, we expect most consumers will be using eSIMs instead of physical Sims,” it wrote.

What’s open to question is whether Apple begins the move to make eSIM support mandatory internationally at the same time  it installs its own 5G modems in iPhones later this year.

Given that the move to its own modems may not be entirely problem-free — and the huge internal effort now taking place around Apple Reality — the company may think it makes more sense to delay international rollout of mandatory eSIMs for a little longer.

At the same time, it may be that the 5G modem it is developing is already being built with best-in-class eSIM integration, in which case the success of that project will be most keenly felt in the US first, where eSIM is already mandatory.

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