#3 – eSIM and global IoT: finally meant to be

eSIM/eUICC offers substantial benefits to enterprise IoT customers in terms of flexibility and increased ease of multi-country IoT deployments. However, adoption has been somewhat slow since the ecosystem around eSIM was not sufficiently developed in the first years after the standard became available. Recently, the technological and commercial capabilities have been maturing, making it easier for enterprise customers to switch CSPs and localize the connectivity. Third parties such as MVNO managed service providers have been launching increasingly attractive offerings based on their relationships with multiple operators and platform capabilities. Rising pressure from market challengers and enterprise customers will drive operators to embrace eUICC and a more open approach. Operators are realizing that the lock-in effect and roaming charges connected to traditional SIMs pose a challenge for IoT global deployments, especially for low-revenue cases, thus hindering growth and innovation. We believe that eUICC will gain increased adoption in 2021 and help accelerate the growth in global IoT use cases.

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For enterprise customers, eSIM/eUICC brings three main benefits. First, it reduces the logistics complexity and cost for global IoT deployments as it eliminates the need to equip devices with different SIMs during manufacturing depending on their destination country. Second, it allows switching the connectivity service provider without costly field service. Third, it enables localization as an alternative to roaming – while roaming has been an enabler for global IoT use cases, it has also been a barrier due to the higher cost and inability to permanently roam in many markets – localization can therefore provide commercial and regulatory advantages.

However, the initial adoption since the first GSMA standard release in 2016 has been slower than expected, reaching 364 million shipments in 2018 including smartphones and enterprise IoT devices, with 2 billion shipments expected in 2025 (source: Counterpoint). The main reason for the low adoption in enterprise IoT is that the ecosystem around eSIM/eUICC has not been fully developed – although OTA provisioning makes it technically possible to switch to a new CSP, reintegrating the service profile and associated rules and controls into a new CSPs infrastructure can pose challenges. The network switch could also typically be made just once and one-way, without ability to “fallback” to the original bootstrap. In addition, smaller operators have been often proponents of eUICC but have not had the scale and capability to serve global customers, while large operators have initially seen eUICC as a threat to their market positioning and roaming revenues and have not been so actively pushing for it. Last but not least, some OEMs have quite long time to market for their devices, which leads to a certain delay effect in adoption.

However, there are a number of factors that are increasingly allowing to deliver on the promised benefits of eUICC and will lead to increased adoption in 2021. The technological capabilities are maturing, with rising number of IMSI profiles that can be stored on the eSIM. Switching CSPs is also becoming easier. Enterprises can increasingly buy eSIMs from third parties such as resellers or MVNO managed service providers that have relationships with multiple operators and can manage the switching of CSPs through their platforms, making the process more seamless for the enterprise customer. These offerings are becoming increasingly attractive, commercially and technologically, even for large enterprises. Localization possibilities are expanding, helping customers avoid high roaming costs and the lack of unified connectivity pricing across different markets – this makes it easier even for the long tail of mid-sized and smaller companies to do multi-country IoT deployments. One of the consequences of the eUICC developments is that the SIM is no longer under the full control of the operators, hardware companies can manage the eUICC and even enterprises themselves can take over that function.

With a large share of global cellular IoT connections being controlled by a few major operators, eUICC adoption is strongly impacted by incumbent operators’ positioning and strategy. Rising pressure from market challengers and enterprise customers will drive operators to embrace a more open approach. Operators are realizing that the lock-in effect and roaming charges connected to traditional SIMs pose a challenge for IoT global deployments, especially for low-revenue cases, thus hindering growth and innovation.

Therefore, we believe that eUICC will gain increased attention and adoption in 2021 and help accelerate the growth in IoT global use cases. This will contribute to increased competition between CSPs but will also drive development in the market, innovation and growth, including in the long tail of use cases and customers. Operators that embrace eUICC and in general a more open ecosystem approach (through collaborations, opening APIs, enabling localization etc.) will benefit or otherwise risk disruption by market challengers.

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