eSIM adoption: Why are some mobile operators still “dragging their feet?”

Why eSIM?

eSIM allows the mobile phone user to connect to multiple networks and have several phone numbers on a single device. You can do this without having multiple plastic SIM cards. This is great for business users where they can have a single phone instead of a personal and business phone. Business travelers like eSIM because they can avoid big international roaming charges (Brexit caused the potential re-institution of roaming charges for British travelers to EU countries) and easily access an in-country network as they travel – without needing a separate phone or having to swap SIMs.

With the rapid expansion of eSIM-enabled smartphones, why have mobile operators been slow to adopt this technology?

Resistance to Change

Developing, integrating, and marketing new technologies is something that isn’t easy to do effectively. With mobile operators, it is even harder.

While tech companies live and breathe disruption, the mobile operator is mostly made up of technologies, processes, and staff who have to keep the existing business model operational. Only a small percentage of the budget, technology, and staffing resources can be secured for new product and service offerings.

eSIM, like other cutting-edge advances, suffers from this problem. And if you don’t develop the processes and educate the customer on the benefits, the transition will slow significantly. And that is what we’re seeing.

Devices that support eSIMs have been around since the launch of the iPhone XC in 2018. And since then other eSIM-enabled devices have been added to the market, including phones, tablets, and laptops. But customer awareness of eSIM, and what it will do for them, is extremely low.

Operators are concerned about changing their battle-tested systems. Offering a downloadable service via eSIM often requires website updates, process changes for customer activation, and compatibility issues running a plastic SIM and eSIM model simultaneously.

So far mobile operators have chosen to pursue a hybrid model of SIM and eSIM environments, but with that, resources are split and development efforts move more slowly. With 5G launches happening now, and as handsets move towards eSIM exclusively, mobile operators will find change headed their way and be forced to embrace it.

Fear of Churn

Over the past several years increased competition and lower switching costs have increased customer churn. Operators have focused on increasing efficiencies in order to deliver service offerings at a lower price rather than looking at customer loyalty and delivering a better customer experience as the solution. eSIM appears to many of them as a direct threat to their business model.

With over 300 million wireless carrier subscribers, the U.S. has a telecommunications industry churn rate of 22% – that’s 95 million customers changing providers. The industry delivered a paltry 31 Net Promoter Score® in the latest NPS ® Benchmarks Report – underperforming every other industry’s customer experience rating measured.

But this isn’t just a customer being annoyed and taking their business elsewhere. It is due to the fact that customers expect more. They’ve been catered to by tech companies providing frictionless experiences. And customers have come to expect that.

Mobile operators have been positioning themselves as the “largest network” or the “first to 5G” with the network being their prime differentiator. For decades that worked well – revenues flowed. But customers are looking at it and seeing themselves stuck in high-priced contracts and wondering, “Why should I stay?” This is contributing to increased churn; pricing lower won’t solve that problem.

Wireless providers have already seen competition from tech companies reduce their market share. Competitors from subscription media and messaging companies have already broken off pieces of mobile operators’ pie – WhatsApp, iMessage, and Viber have already taken 80% of messaging traffic. Skype has over one-third of all international voice traffic minutes. And during the pandemic, competitors like Zoom took over even more.

“Many telecom carriers are facing significant decreases in their basic communication service revenues: drop-offs of as much as 30 percent in SMS messaging, 20 percent in international voice, and 15 percent in roaming. Combined with intense competition due to lagging industry consolidation, this pattern has led to steep declines in average revenue per user; at best, minimal revenue growth; and tightening margins.” – PwC, Telecommunications Trends

Disruptors are a significant threat to the mobile operator business model as focus on the customer experience and personalization become the top customer priorities. While eSIM looks to be just a way for customers to escape, the mobile operator must recognize that it is the gateway to providing the customer with an innovative and personalized customer experience. That, not bundles and contracts, will be what keeps their customers long term.

COVID-19 Travel Impacts

Covid-19 had a significant impact on business travel.

Most US-based companies’ travel budgets declined by 90% or more beginning in early 2020. With travel restricted to only the essential trips, and conferences going virtual, domestic and international travel plummeted.

While mobile operators have concerns about eSIM and customers changing providers, they had a positive service to promote with eSIM for business travelers. Not having to carry around a second business phone or purchase an in-country SIM card is a benefit business travelers value. But with business travel down due to COVID, there wasn’t enough of a market to justify educating the business travelers on eSIM or driving technology improvements around eSIM delivery that would otherwise have happened.

With the revival of business travel and in-person events, this market should return, albeit at a lesser rate than before the pandemic. With that mobile operators will increasingly be able to support a case for increased spend to make a bigger push towards integrating and promoting eSIM.

Prioritizing 5G

Over the last several years increased competition and reduced switching costs have increased customer churn for mobile network operators. Slow mobile data speeds are the biggest churn driver for operators – 43% of customers cited slow mobile data speeds as a reason they’d leave a network – indications are there’s less churn on 5G.

So while COVID decimated business travel, it also impacted consumer expectations about network speed.

As employees shifted from office environments to working from home, companies changed how they communicated with their staff. They started holding more Zoom meetings, which required high-bandwidth solutions for video. As consumers got used to being able to do video calls from home, they also expected the same from their mobile device.
With that came mobile operator drive for 5G.

As mobile operators focused their capital budgets on getting their networks 5G ready, resources were diverted from eSIM technology developments.

With 5G launches underway, mobile operators may soon give their attention and corporate spend to more of the customer experience elements that will be even better on 5G – eSIM technology may then be one of those new priorities.

Technological Challenges

With networks, contracts, and processes built around a physical plastic SIM card that acts as a barrier, or at least some friction, to keep customers from switching, going the eSIM route requires a shift in approach.

Systems set up to provide a SIM card already exist and work within the operator’s infrastructure. When you now need to provision an eSIM with a QR Code or App, software changes and system adjustments are necessary. Or operators must work with 3rd party.

In-app eSIM provisioning depends on an API called a local profile assistant, which operators can only access once they prove their compliance with the subscriber management system provider.

Differences between Android and Apple apps make things even more complicated, creating a GSMA-compliant eSIM solution can typically take up to a year.

Many 3G and 4G mobile operators own their SIM management platform. With eSIM each supplier may have a different management platform. Developing a common platform that will work for multiple operators would help keep the process simple and encourage operator adoption.

Improving the Landscape for eSIM Adoption

Smartphones have completely transformed the way people shop, communicate and interact with business. Mobile operators are lagging behind. eSIM adoption can help the operator begin the shift from a “network-focused” model towards a “customer experience” based one.

Upgrading existing infrastructure to meet eSIM requirements can often be slow and clunky. triPica helps operators meet these challenges. triPica is an innovative and agile SaaS IT company that helps mobile operators give freedom, autonomy, and transparency to their users. triPica provides the most adaptable and fastest to implement BSS worldwide that incorporates online subscription, product and customer management, billing, and accounting.