#BONUS – The old days are gone, let the SIM cards out

Summary: Northstream has historically been very outspoken about the need for operators to reduce legacy, and SIM cards are no exception. We believe that 2015 will be the year when the pressure to reinvent the SIM cards, as well as the high costs associated with handling them, creates a very strong business case to move to a virtual platform.

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SIM cards are a legacy that has a lot of merit, but might have outlived their necessity. The industry has spoken of virtualizing SIM cards for years, but since cellphones have been the primary devices that use SIMs, the traction has not been significant enough to cause a change. However, with a rapid growth in cellular-enabled IoT devices, the need to reinvent the SIM card becomes increasingly urgent. According to Ericsson, there will be around 230 million cellular M2M subscriptions at the end of 2014, and 800 million by 2020.

As operators are desperately trying to control costs in light of reducing margins, they cannot afford to ignore the significant costs associated with handling SIM cards. Industry experts state that an operator is likely to spend about 3-4 euro for hardware, logistics and provisioning per SIM card. With a total SIM shipment volume for 2013 of nearly 5 billion units, the direct costs alone for SIM cards is about 15-20 billion euro per year. If one also considers the indirect costs like ordering and customer care, the number might easily be doubled.

The arguments in favor of soft SIM are plentiful. It allows flexibility for device manufacturers, cost reduction for operators and it opens up for new business models for various actors. However, there are still some remaining challenges that the industry needs to overcome.

One major challenge that is commonly used to justify the need for SIM cards is security. SIM cards provide a physical layer of security that is hard to breach. However, the vast majority of customers are actively seeking cheaper and more efficient ways to communicate, gladly making the tradeoff to have less security. One needs only to look at how frequently OTTs like Skype or Whatsapp are used for both private and corporate communication, or how often people use public Wi-Fi to send emails, to understand the priorities of customers. Virtual SIMs would allow customers to get the flexibility they so actively seek, while simultaneously allowing for reduced costs for the operators.

Northstream has historically been very outspoken about operators’ need to reduce legacy and SIM cards are no exception. With the rapid growth of IoT and the consequent demand for SIM cards, Northstream believes that 2015 will be the year when the business case is strong enough for the operators to move to a virtual platform. It is our hope that the escalating number of IoT installations with specialized SIM requirements, as well as customer demand for flexibility will encourage the industry to widely adopt a soft SIM solution.

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