A staggering 50 billion IoT devices are expected to be connected by 2020, making IoT one of the hottest topics at this year’s MWC.  Cellular connectivity in IoT is poised to be the next big wave in this technology revolution, as evidenced by the increasing number of devices cropping up in the market. Given the wide variety of forms and functionalities these devices represent, on demand connectivity and inter-operability are going to be key factors in taking this business to the next level.

The current cellular connectivity landscape is entirely designed on each mobile device hard-linked to a network provider through a physical sim. This has created a linearly dependent system that may not benefit devices of the future or its consumers. So how does cellular connectivity in IoT take off in such a scenario? With the physical SIM being identified as one of the biggest roadblocks, the embedded SIM or eSIM technology which offers the ability to remotely change service provider has emerged as a viable solution to this challenge.

The eSIM Technology

The eSIM technology is an embedded SIM that is re-programmable and can support multiple profiles. The unique characteristics of eSIM that addresses the connectivity and inter-operability requirements of IOTs are the following:

• Smaller Form factor: OEM’s are on their way to develop a wide portfolio of connected devices. The shape and features of the physical SIM card is a big constraining in terms of design of the device, manufacturing and interoperability. The form agnostic eSIM eliminates this issue, thereby allowing OEMs to design cost-effective, sleeker and waterproof devices.
• Fast and Flexible connectivity: The eSIM breaks the physical SIM’s lock-in effect (a SIM tied to a single operator) in a device. The eSIM along with remote provisioning system allows consumers to download and install operator profiles “over-the -air”. This flexible model allows fast and easy switching between network operators and the ability to manage multiple profiles from different operators on the same device.

The eSIM along with remote provisioning technology has already gained adoption used in automotive industry, for connected cars. With GSMA recently releasing a standardized approach for remote provisioning, we can see wider adoption of the eSIM within the IoT sector.

The eSIM landscape – Stakeholders, Roles and Impacts

Although GSMA has instituted the standards towards realizing inter-operability enabled by the eSIM, the real challenge lies in its implementation. The telecom industry while adapting to the eSIM technology will go through a series of changes that are transitional in nature. During this period, physical SIMs will not cease to exist and devices using the them will continue to need support from MNOs.

The landscape may also see a series of new entrants who develop or support systems that enable “over the air” provisioning. For existing players like OEMs and MNOs to retain their competitive edge, considerable changes to their business models are required. OEMs and remote subscription managers are the most thrilled stakeholders in this developing ecosystem. OEMs will widely benefit from manufacturing IoT enabled devices that carry an eSIM which can be activated anywhere in the world. SIM vendors can expand they competency to support profile creation, user authentication, data encryption and security. On the other end, eSIM facilitates managing multiple subscription from a single profile and end users benefit from this without having the hassle of carrying multiple SIMs.

MNOs and their changing role in SIM management

While eSIMs bring in benefits for all the players in the ecosystem, it also poses unique challenges to the MNOs. The MNOs have been enthusiastic about business opportunities within IoT. However, with eSIM coming into play, there have been questions about the role of MNOs in SIM management. MNOs fear losing, their direct access to consumers, to subscription managers. To stay ahead MNOs must revamp business models which may include adding comprehensive IoT subscriptions to their services. The shift from a physical SIM to eSIM will simplify logistics for MNOs. Re-configuring operations for provisioning eSIMs and offering complete connectivity for multiple devices, coming up with pay per schemes on devices will help MNOs retain their competitive edge in this evolving ecosystem.

Leveraging partnerships – key to success in an evolving eSIM ecosystem

Building partnerships and developing services that support each other are going to be key in delivering secure, scalable, inter-operable and functional connectivity for IoT devices of the future. As outlined in the figure above, the eSIM can efficiently drive the expansion of IoT in an environment where OEMs, MNOs, SIM vendors, remote subscription mangers and IoT platform developers work together.  Some of the biggest players in the SIM provisioning industry such as G&D, Gemalto and Oberthur are coming up with innovative services that MNOs can leverage to boost their position in the eSIM ecosystem. On the other hand, SIM vendors and remote subscription provisioning managers can benefit from using an operator’s expertise in infrastructure to strengthen end to end encryption and security services for customers. Building such partnerships and developing services that support each other are going to be key in delivering secure, scalable, inter-operable and functional connectivity for IoT devices of the future.

Conclusion

Although the e-SIM initially appears to be a replacement for the cumbersome physical SIM. Recent developments in business models around the eSIM show its ability to change telecom business as we know it. The traditional roles of OEMs, MNOs are all set to be redefined in a direction that would largely benefit the end user. The eSIM technology provides a platform for OEMs and MNOs to work together, opening access to data about devices and consumer habits that was previously unavailable. These valuable insights allow them to create newer products and services, expanding each of their core business. Connectivity is key the Internet of things, and this alone signifies the importance of the role MNOs will continue to have in this space. IoT revenues for MNOs from connectivity alone are estimated at about 25% while the remaining will be through the value-added services they offer. Being early adopters of the eSIM and establishing services that are driven by user experiences will help speed up the IoT revolution.