To switch or not to switch: The impact of eUICC on End-User Behaviours

Written by: Iain Maxwell

September 19, 2017 - The impact of Embedded UICC (eUICC) in the Consumer RSP domain may cause several changes throughout the industry, but how will the Consumer RSP domain’s ecosystem evolve and adapt to meet and address these changes? Will End-Users be switching eUICC profiles every day to get the best rates? How will the MNOs try to prevent this, or will they actually encourage it?

Current Situation

We had an early taste of how Apple’s vision of the reprogrammable SIM world might have been via Apple SIM. Although it failed to deliver, due to well-known reasons that won’t be discussed here, it whetted the appetite of the End-User. As a result, the whole telecoms industry is on the fast track to introduce eUICC in the Consumer RSP domain.

Until that happens data roaming remains the only option and M(V)NOs offer roaming add-on packages that provide you an allowance of data, texts and minutes to use abroad. These are specifically aimed at travellers allowing them to by-pass roaming fees, as the End-User will only pay the price of the add-on and won’t be liable for any additional charges, unless you exceed the agreed limits. It is expected that this will still continue for the foreseeable future, but some M(V)NOs waive roaming fees in certain countries as a differentiator and in the European Union roaming fees have been scrapped since June 2017.

Profile Switching

The nature and business use case for the Consumer RSP domain is similar to that of M2M, minus the enticing draw of working with Service Providers and OEMs normally out-with the reach of the MNOs. In Consumer RSP, the main focus is the End-User and MNOs could potentially gain and lose customers on a daily basis. Traditionally the M(V)NOs have two different type of core End-User customer and the impact of the eUICC on the pre-paid and the post-pay customer types will be quite different.

 

 For the post-pay customer it is expected that, at least initially, that this type of customer churn will not occur as profile switching by the End-User on a daily, weekly or even monthly basis will not be offered. Therefore, the current business model where MNOs tie the customer into subscription plans for 12-24 months will still stand fast. This will allow the MNOs to:

  • Adapt to the new Consumer RSP ecosystem at their own pace, learning the commercial ‘ins and outs’ along the way.
  • Continue to subsidise the device to deliver the business model that the End-User has become accustomed to.
  • Change their processes to introduce consumer wearables, watches and fitness trackers all equipped with stand-alone mobile-network connectivity. This is similar to the lure of working with previously unreachable Service Provider/OEM advantage that M2M offers, therefore is a must for any MNO to flourish in the Consumer RSP domain helping to balance their business offerings.
  • Consequently MNOs will begin to offer multi subscription packages to allow the End-User to connect and manage all their devices e.g. Smartphone, fitness tracker, other wearables, and also potentially incorporating the car from the M2M domain.

 

 Figure 1: Deutsche Telekom's multi-device subscription plans

Source: Deutsche Telekom

When the contract ‘tie in’ period expires the End-User has the freedom to switch MNO if they so wish, as they have effectively paid for the device, but without having to arrange, then wait for a new SIM to arrive in the post or having to visit a MNO outlet store. With the eUICC, you only need to register the new device, which you would already be doing, thus eliminating the inconvenience of dealing with devices that require different SIM form factors. During such a switch the End-User has become accustomed to also receiving a new handset either for “free” or at a minor to average top-up fee for a flag-ship device.

If market pressures on post-pay subscriptions were to change to allow the End-User to easily switch to use the profile of another MNO, irrespective of how frequently this occurred, it would cause the MNOs to start cutting back on the amount of subsidization that they offer per device. This could in the long-term result in many MNOs deciding to charge full price for handsets. However, it should be noted that this type of profile switching flexibility in the post-pay world is not expected for the foreseeable future.

But when you consider the impact that eUICC will have on the behaviour of the pre-paid market, it is expected that market pressures and the existing short-term nature of this market is where the eUICC will have the biggest impact as it is a perfect fit, albeit without the benefit of instant mobile number porting (MNP). The convenience that eUICC offers in switching profile is perfectly matched for the business case of this customer type. But M(V)NOs with large pre-paid customer bases have already found the correct balance to address this market. They know that the niche ‘value-add’ targeted specifically at this type of customer, along with excellent End-User experience especially regarding call quality, coverage and customer support, can secure customer loyalty. So the impact of eUICC on End-User behaviours in the pre-paid market is the most interesting, but it remains to be seen.

We are still far off from the point where the End-User can use an aggregator application on the device to determine the best tariff at any given moment and dynamically switch profile to make a call, send a text message or surf the Internet depending on which MNO offers the cheapest service or the best coverage. End-Users will be able to download several profiles, but can only switch as frequently as they are allowed, which could in theory achieve a similar end result. But daily, weekly or even monthly profile switching with instant mobile number portability (MNP) on devices that have a phone number still seems unlikely for the short to mid-term future. If the device doesn’t have a phone number i.e. tablets or a wearable then MNP becomes irrelevant.

One major impact of eUICC is that it will allow customers to dynamically compare networks against each other in a way that they have never been able to before. Call quality and coverage can be compared within a few minutes by simply switching the profile if either of these services are posing a problem on the current subscription. Therefore M(V)NOs will need to develop new interesting and competitive service offerings to appeal to the many different End-User segments. As mentioned previously the ability to offer multi subscription packages to allow the End-User to connect and manage all their devices under a single subscription is expected to become more prevalent. But it will be interesting to see what other new creative and innovative service offerings the M(V)NOs come up with to pull in new customers. The quality of the network services will also be more exposed to End-User and therefore will need to be maintained at higher levels by the MNOs. A competitive market like this is a healthy market which is good for the End-User.

The Future of Roaming

One of the main benefits of Apple SIM was its ability to bypass roaming fees delivering the End-User with a local subscription to use while they were abroad on a visited network. This concept is also seen in the automotive industry where a car is manufactured in one country but the telematics connectivity is not activated by the End-User until they start using the car in another international location. In this M2M example though, the car largely stays in the destination country. Transposing this to the Consumer RSP market using the Apple SIM template, one could envisage that even though the End-User is ‘tied-in’ to their preferred MNO they could be allowed to switch profile to a local MNO in a foreign country for the duration of their visit, but only if their MNO does not have a local partner or foreign presence. Then on return they would automatically be switched back to their original MNO. For data-only plans its simply a case of consuming a commodity at a local rate wherever you are in the world, but in the case of voice and SMS services the End User could have the benefits of the local number or they could opt to retain their home number and still place calls at a local rate similar to their home number or have the local number and have their calls forwarded to the local number from their home number.

As mentioned previously, since June 2017 the European Union has agreed that that roaming fees will disappear, but if this were to be extend to other countries world-wide it could nullify one of the possible advantages of the eUICC.

Conclusion

The current eUICC ecosystem originated in the M2M domain. There are many similarities between it and the new developing Consumer RSP ecosystem, but the differences in the two architectures and associated business use cases mean that we expect to see changes in the roles within the Consumer RSP ecosystem. The main role change that eUICC introduces in Consumer devices opens up the opportunity for OEMs to become MVNOs. Consequently the End-User relationship may move away from the M(V)NOs towards the OEM relegating the MNOs to become ‘bit-pipes’. The M(V)NOs would like to avoid this potential shift in the ecosystem dynamic and going forward it will be interesting to see how they try to stop this happening.

In the short term future pre-paid End-Users may be switching eUICC profiles as frequently as every day to get the best rates but not with instant MNP included. Mid-long term might see the arrival of aggregator applications on the device that allow the End-User to view and choose the best M(V)NO rates. For post-pay subscriptions the MNOs are still expected to ‘tie in’ the End-User to allow them to keep subsidizing the device. But the levels of subsidization will drop slightly to off-set the fact that End-User churn, although manageable, is unavoidable. In a bid to keep their customers the M(V)NOs will start to offer more competitive subscription plans and one expected trend is multi-subscription plans allowing the End-User to connect and manage all their devices.

If the demise of roaming fees in Europe moves to other regions of the world one of the major up-sells of the eUICC, namely avoiding roaming fees, will be lost. But the eUICC still has a lot of other benefits to offer across the whole of the telecoms industry and ultimately the End-User.

Disclaimer

These are the personal opinions of UL’s employees and its guests and should not be misunderstood as representing the opinion of UL's clients, suppliers or other relations.