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Summary:

If Apple is working with SIM card manufacturer Gemalto to cut out the carriers, I’d advise Apple to ditch a fancy SIM card that can be remotely changed, and instead use an Apple-proprietary SIM card fully controlled by Apple, turning it into a type of MVNO.

iphone-sims

Last month, GigaOM posted the news that Apple is working with SIM card manufacturer Gemalto to cut out the carriers. A new embedded SIM card from Gemalto would allow the loading of the operator-specific data onto the SIM after the phone was purchase. This week, there was news of the GSMA working to allow this type of SIM and of a potential war between Apple and European carriers over this. I’ve researched this type of SIM for the equivalent of the U.S. Federal Communications Commission in The Netherlands as a solution to overcome business problems of large-scale, Machine-to-Machine (M2M) users. In itself, M2M is worth an article, but this one focuses on what Apple could do.

If I had to advise Apple, it wouldn’t be to use a fancy SIM card that can be remotely changed, but instead to use an Apple-proprietary SIM card that contains no changeable data and is fully controlled by Apple. Then, the consumer could buy access to mobile networks throughout the world either through post-paid or pre-paid options offered by Apple. Apple would manage the subscriptions and authenticate the users on the correct networks. The user could switch mobile networks but have all of it managed by Apple.

To understand the extent to which Apple could change the industry for its own — and its customers’ — benefit, it’s necessary to understand the difference between a solution in which Apple uses carrier data and one in which Apple uses its own data on the SIM. To be clear, this is for data only as voice tends to have more regulatory oversight.

The SIM Is the Root of All M2M Evil

Apart from being a small, weirdly shaped, smart card, a SIM card is the cornerstone of mobile connectivity and security. For instance, it holds information for the device to connect to the right gateways and servers. There are two datapoints on the SIM that are unchangeable and highly critical:

  • the unique International Mobile Subscriber Identity (IMSI) number and,
  • cryptographic keys and parameters unique to that SIM and the mobile network it belongs to.

The first six digits of an IMSI identify the mobile network. A radio network will check these first six digits, then redirect the traffic of the device to the correct switches and authentication centers. From a network’s point of view, it’s irrelevant if the device is roaming internationally or not; all the network cares about is whether or not those first six digits are from a carrier that has a contract. The keys and parameters are so secret that often only the company that makes the SIM, like Gemalto, knows them, and the company stores them on the mobile network’s authentication center. To ensure the security of the network, the IMSI and keys generally can’t be changed on the SIM. All other information can generally be changed.

Just being able to change the IMSI and the keys leaves the customer still fully in the arms of the carrier. Apple might get a fee every time an iPhone user changes operator via the iTunes store, but a game changer it isn’t. It’s not even unique. Almost every company that works on wireless networks has a solution to remotely update SIM cards and to be able to change or add networks on the SIM.

The international standardization organisation 3GPP even looked into several possible solutions to guarantee security and to allow remote updates of the IMSI and keys on the SIM. On Thursday, in an about-face, the GSM Association decided to look at ways to change mobile operators without physically changing the SIM cards. The GSMA represents almost every 2G/3G/4G network in the world by now and therefore, carries a lot of weight in decisions of what is and isn’t possible.

How to Really Change the Game

An alternative Apple could look for is to get its own IMSI-numbers and crypto-keys to effectively make every iPhone/iPad user a roaming user on any network. This is the solution I researched for the government of The Netherlands in the context of M2M communication. Using this solution, a consumer would choose a network from the iTunes store and would have a contract for a day, a week, a month or a year. The device would know what network to log onto because of the mobile network codes transmitted by antennas.

Instead of using its own systems to verify whether the customer is allowed to connect, the SIM would need to ask Apple. This would give Apple full control over what networks the customer can access and at what price. Here are some ideas of what Apple could do if it used Apple-proprietary SIM cards with Apple IMSI numbers:

  1. It could sell competitive roaming deals to its customers. International roaming is horribly expensive for telephony and even more so for data. If Apple would connect with these networks directly, the networks wouldn’t know whether or not the customer was from France, the UK, or Zimbabwe. All it would see is an Apple IMSI. The first six digits would direct the device to Apple, which could then offer its customer a data roaming deal at prices as low as local rates. Customers could buy data roaming for an hour, six hours, a day or a year and operators could compete for their patronage. Apple would guarantee the payments and collect these through iTunes. It would pay the carrier after the customer has made use of the service.
  2. Apple could sell failover services for use if one network fails. If Apple had contracts with multiple networks in a country, it could sell customers a failover service that would allow them to make use of other networks when there is either no coverage or a network failure. Again, because Apple controls the SIM, it controls who has access to what network.
  3. Apple could sell seamless Wi-Fi roaming on Starbucks or FON-operated Wi-Fi networks. The identification and authorization offered by the SIM works everywhere, on every network. It can also be used on Wi-Fi networks. Instead of having to press the “I accept” button, or enter payment details, connecting to Wi-Fi becomes seamless. The Wi-Fi network would receive the SIM credentials, verify with Apple if the SIM is authorized, then open up the network to the device.

All these options scream of Apple bypassing carriers, who would be relegated to dumb pipe status.

How to Make This Possible?

In order to be able to do this, Apple would need to go through a series of steps:

  1. Apple would need to get hold of an IMSI number range. Effectively, it would need a six-digit carrier code, also known as the Mobile Country Code + Mobile Networks Code, to be able to make the full 15 digits that an IMSI consists of. For this, it would need to go to the ITU, Study Group 2 in Geneva to get a global code, or it could go to a national regulator in most countries to get one in those countries. Its biggest problem would be to convince regulators that it fits the law of that country. Most countries’ laws specify that only public networks have access to IMSIs. Apple offers its device publicly to any users, so it probably fits the bill.
  2. Apple would need to contract someone to either deliver and/or operate an Authentication Center/Home Location Register. This box tracks which network a device has registered on. This is necessary so that incoming calls are sent the correct way. It also authenticates the device every time it wants to make use of a network. This is rather trivial work, and could be had from a number of service providers.
  3. Apple would need to negotiate access to networks on a global scale. Tourists want to use their iPad in Timbuktu if they so please. This isn’t as simple as getting a roaming deal. Unfortunately, roaming is usually limited to those that already have a spectrum license (and are a member of the GSMA). Most roaming agreements require a form of reciprocity, and Apple can’t deliver this. There are ways around this, for instance, by becoming a mobile operator on a small Pacific island, or by being very convincing, because in reality the reciprocity demand isn’t necessary.

If Apple did this, it would revolutionize telecommunications. It might kill extortionate mobile roaming rates and replace them with competitive rates. It would open a clear path for others to follow. Built into every MacBook and iPad, Apple would be able to deliver the Holy Grail that every laptop manufacturer is after: a device that can get access to the ‘Net everywhere in the world.

Rudolf van der Berg is a Management Consultant at Logica Business Consulting in The Netherlands. He blogs about his work on http://internetthought.blogspot.com

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  1. This is all nice and all, but what would be the incentive for any operator in the world to allow this? Just having iPhone to sell means nothing if you can not sell minutes and data as well. On the other hand, consumer would be in perpetual roaming and there is no way that roaming prices would be lower than non-roaming prices. Also, if I’m not mistaken, transfer wifi-3g is already possible on T-Mobile network in US (for select phones or planned for “near” future in other cases).

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  2. If this happens only with Apple devices, it won’t make a difference since Apple products are used by only a small number of people

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  3. @Tim

    “If this happens only with Apple devices, it won’t make a difference since Apple products are used by only a small number of people”

    Yes, Tim, Apple are only adding new users at say 14.1 million a quarter. That’s a small number indeed.

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    1. By the end of 2009, the number of mobile cellular subscriptions worldwide reached approximately 4.6 billion. Yes, RattyUK, Apple are only adding new users at say 14.1 million a quarter. That’s a small, small, small number indeed, absolutely miniscule

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      1. 4.6 billion Smartphones? How silly of me. Apple are insignificant then you have opened my eyes.

        Or could it be that you just went for a really high number by including every stupid little phone to prove your empty point?

        14.1 million units of a high end phone is something any other manufacturer would be desperate for.

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      2. Most SIM cards are used in featurephones. Since only the few Apple phones used by fickle fashionistas will have embedded SIM cards, Apple will be ignored. Anyway, Apple’s marketshare is decreasing, as more and more people are choosing instead to get better phones. Apple, after a brief time in the spotlight, is well on its way back to being ignored, a place it knows very well.

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  4. “If I had to advise Apple, it wouldn’t be to use a fancy SIM card that can be remotely changed, but instead to use an Apple-proprietary SIM card that contains no changeable data and is fully controlled by Apple”

    If this ever happens – you can bet i am giving up my iphone 4 and any other iphone is out of question. I already hate i have only option to get apps and i cannot side load my app unless i void my warranty – its not just sw warranty its the whole warranty – so if i unlock my phone to slide load the apps and my display fails after a while – then its out of warranty since i unlocked it…giving more power to such a evil company is unthinkable…

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  5. Mukesh Aggarwal Saturday, November 20, 2010

    Am I the only one who like the current ‘evil’ SIM cards ?
    I can swap them out on my unlocked phone when I travel and be not at mercy of carriers ?
    For me, having apple control even SIM cards would just make apple one of the carriers. What difference will it make if verizon or att or apple controls the subscription ?

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  6. I guess the telcos will have no problem with this so long as Apple plays on a level playing field – i.e. operates under regulatory constraints. For example each telco has to keep records for legal intercept – bet Apple have no plans here.

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  7. Clarification: This probably works best with data-only devices, like macbooks, iPads and iPods. Phones are often under a different set of regulations. The way it would work best, is if Apple had a contract with multiple networks in a country. This would allow for competition between the networks. The user would arrive in a country and select the best deal available for his needs. Apple would then open access to the network chosen and that network gets paid.

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  8. Thank you for another great article. Where else could anyone get that kind of information in such a perfect way of writing? I have a presentation next week, and I am on the look for such information.

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  9. Rudolf, great article.
    I think this “Global, Multi-Carrier MVNO” will happen anyway…just because in more and more saturated markets, carriers will need to battle even for the duration of call (or for a day or week) to win the highest value subscribers. Here are key signals to this trend
    - Mobile Number Portability already allows riding among carriers while keeping the same MSISDN. SoftSIM is another, simpler way to make that ride much easier.
    - Most carriers hated the idea of MVNOs just 5 years ago, thinking they will disrupt them. Over time, they discovered more MVNOs was further ways to run after specials segments they could not target by themselves. Today, carriers are happy with 20 MVNOs, opening more and more their Networks (Big Retailers even have their own rating engines).
    - RIM is a sort of global MVNO in data. They negotiated the blackberry’s data offers with hundred of carriers (along with a central NOC) … thus avoiding mad roaming data plans.
    - Amazon’s kindle provides the same. You can download Kindle’s books via 3G from various countries…via the 3G SIM included in the Kindle. Amazon manages the global bill, centrally.
    SoftSIM is a piece in “global, Multi-Carriers MVNO” the puzzle. Missing today:
    - Incentive for the carriers to accept them (apart from a threat of being sidelined by Apple and missing a potential big train…).
    - Benefits for subscribers (against the “risk” of being locked with Apple vs. Carrier)?
    Back in 2005, we designed an airtime trading system where a set global, multi-carrier MVNOs would sign various types of contracts: Low Cost (cheapest call, all time), High Value (best network, lowest drop calls rate, highest voice quality,), Best Data (best available bandwidth any time, best relevant technology – 3G/LTE….) …and a back end system would be swapping and connecting to the subscriber’s SoftSIM to the best available carriers automatically.
    In general, a subscriber is covered by 3 to 4 wireless signals any time…. so there is some unused capacity that can be traded easily, and automatically. I see this a good driver for carriers.

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    1. @Otto
      You make it sound like they have a choice. Data is getting cheaper, fonera is growing and growing (and Google – the Mobile OS guys, and Skype – something with internet telephony, must be smiling). It might be the only thing they can do.

      @RattyUK @Tim
      Even the Apple people think that Android (read Google) will be the dominant player, so while Apple is working on it, i think Google is going to be the bigger player, having Google Voice and being a “Fon Friend”.

      @Tkanet – “Mobile Number Portability”
      Why go mobile if you can go VoIP (especially with Wifi, 4G roaming). You can have an 085-number (in the Netherlands) which are already used for roaming VoIP users. You would not have to buy the “expensive” 4G data Kb’s.

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  10. Great article – thanks! Although I don’t see the big deal whether one buys a (soft) sim from Apple (or whoever – why can’t Vodafone or ATT etc do this?), I do see the value of innovation in this area. If that’s what this sparks, then bring it on!

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