Weekly Update

The Apple SIM will face huge challenges on the road to disruption

Gigaom’s Kevin Fitchard was among many tech writers who reported last week that cellular-enabled iPad Air 2 models will be the first device to include the Apple SIM card, enabling users to switch carriers without swapping out a SIM card. Consumers potentially could use the card to shop for the best short-term deal on the go, choosing whichever available carrier offers the best price and service at any particular time and place. It’s worth noting that Apple opted not to even mention the inclusion of the carrier-neutral SIM during its launch event, so we still don’t know details such as how the card will need to be provisioned from carrier to carrier, or how much users might have to pay to activate it.

The threat, of course, is that Apple could package its SIM in the iPhone, freeing the biggest-spending mobile users from their operator ties. And while Fitchard’s piece was measured and level-headed, the news prompted some incendiary headlines: TechCentral predicted Apple SIM will shake industry foundations, The Register said it signals the war that will overturn the network world, and The Verge opined that the traditional, removable SIM card is about to die. The fallout was immediate for SIM manufacturer Gemalto, which saw its shares drop 10 percent following the news.

The Apple SIM may eventually become the game-changer so many are predicting, of course, but there are several reasons to keep expectations in check for at least the next few years:

  • It’s in only the iPad so far. Most tablets don’t support cellular, and carriers have begun to target tablet users aggressively to boost data revenues. It’s logical, then, that they’d be willing to be more flexible and succumb to Apple to increase tablet-driven data traffic on their networks. But the Apple SIM will support only four carriers out of the gate – Verizon Wireless is conspicuously absent – and very few operators would happily support the inclusion of the Apple SIM in the iPhone. Additionally, a data SIM card is easier for Apple to manage than a full voice and data SIM.
  • The Apple SIM needs vast carrier support. The idyllic scenario of moving from network to network with ease requires the support (even if it’s unwilling support) of multiple network operators in each market. That’s a big challenge even for Apple, which admittedly is uniquely positioned to force operators to loosen their grip on consumers.
  • Handset costs still lock users in. Two-year contracts are becoming a thing of the past, but many consumers are opting to buy their phones on installment plans that essentially marry them to a carrier for two years to pay off the device. Those users presumably wouldn’t be able to take advantage of the Apple SIM until they own their phone outright.
  • Logistics won’t be easy. As ZDNet pointed out, the phone number assigned to an iPhone SIM card is still crucial for users, unlike numbers assigned to tablet SIMs. But porting that number from operator to operator is complicated and time-consuming – and those problems could be deal-breakers for users hoping to switch carriers with just a few clicks. And, again, questions loom about how the Apple SIM will have to be provisioned as users move from carrier to carrier.
  • An Apple MVNO is an unlikely move. Some have gone so far as to suggest that Apple is moving to become a mobile virtual network operator, using iTunes as a marketplace through which to sell connectivity and services on carrier networks. (Similar rumors first surfaced more than two years ago.) But that strategy would not only further antagonize Apple’s carrier partners, it would require Apple to provide billing and customer service to mobile users. As The Register wisely noted, that would position Apple as the target of the ire of customers who are unhappy with their service. And that’s very risky for a company with a gleaming reputation for PR.

Apple dramatically changed the mobile landscape with the iPhone and the App Store, prying the carriers’ hands off the app and content market. It’s certainly possible that the Apple SIM emerges as another disruptive weapon, so carriers should be already be developing strategies to counter Apple. But Apple will face some major challenges if it opts to package its SIM in the iPhone.