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Summary

Apple's new iPhone Xs devices include technologies that embody two of the most significant trends operators need to get a grip on: the first is eSIM and the shift to becoming a fully digital service provider; the second is Gigabit LTE (Cat 16) and the differentiation it offers around the network experience. While Apple isn't the first smartphone vendor to support these technologies, it's the first to combine them in one device. By doing so, it has given operators a significant opportunity to differentiate in two key emerging areas. Telcos to support eSIM at launch include AT&T, Verizon, and T-Mobile in the US, and Deutsche Telekom and Vodafone in some of their markets. EE, which already supports the eSIM-enabled Apple Watch, will support the eSIM iPhone in the UK, while Airtel and Jio are onboard at launch in India. Global resellers Truphone and GigSky will also support it.

eSIM: More choice for consumers; greater opportunity for service providers

eSIM sits somewhere between fear and skepticism in the minds of many of the operators that don't yet actively support it. The main reason telcos push against its introduction is a fear of kick-starting a never-ending wave of customer churn enabled by easy choice of a constantly changing virtual shop window offering tariffs that race each other to the bottom of the market. At a very simple level, this view doesn't take into account the fact that most people who buy high-end smartphones are on some kind of contract with their operator, even if it's a SIM-only one, and these contracts still offer by far the best value over prepaid plans that allow constant churn. So for the vast majority of consumers, especially in developed markets, a contract with an operator is the best way to access the best deals and the best network experience in terms of speed. In that respect, operators have already stopped the biggest potential threat of eSIM from taking place: their most valuable customers can't easily leave them.

In terms of the eSIM opportunity, the technology will let operators offer a better service experience by doing away with shipping and installing plastic cards in devices. This is good for consumers because it means they can activate service immediately, and it's good for operators because it means they can save time and expense on handling and shipping bits of plastic. This is even more important for telcos with enterprise customers: offering eSIM to those users will make it much cheaper and easier for them to provision and manage a large number of often-changing SIM profiles.

But of potentially greater benefit for telcos and consumers is that eSIM enables them to sell a wider range of price plans to consumers in-market and to those visiting from outside. With eSIM, operators can support multiple identities (two at the moment with Apple's eSIM implementation), which opens up a range of possible offers based on specific services or tariff plans. For instance, a consumer might have a contract with operator X and buy a premium music-streaming zero-rated plan from operator Y or a weekend high-data allowance plan from operator Z. Or a telco might specialize in offering in-bound roaming offers, thereby opening a whole new revenue stream.

From a strategic planning perspective, operators need to assess whether to buy eSIM remote provisioning technology from outside vendors or develop it in-house. Their choice is likely to be determined by speed to market (buying the technology) versus cost savings and ownership (developing in-house).

Gigabit LTE: The network experience increasingly drives churn

The network experience has always been one of the main reasons people leave one provider for another, and with the ongoing explosion in data use, this has never been more true. Operators that can prove they offer the best network experience, usually through independent network tests, are the ones that are winning and retaining the highest-value customers. Now that Apple's flagship devices offer Gigabit LTE, operators that can effectively communicate to the market that they offer the best experience of the iPhone Xs, and of course other Cat 16 devices, will win out over those that don't support it or do so in fewer areas.

So like eSIM, Gigabit LTE – and 5G, when it arrives in mainstream devices – gives operators a great opportunity to differentiate over rivals. Apple's iPhone Xs points the way forward to where operators need to be to offer the best digital experience. It also gives operators an excellent opportunity to differentiate from rivals. Those that can take these network and service experience opportunities will win out over those that don't.

Appendix

Further reading

The Road to 2022: Key Consumer and Entertainment Trends, CES003-000266 (September 2018)

Consumer eSIM Devices Forecast Update, CES004-000038 (July 2018)

5G: Regional and Global Approaches to a Technology Step Change, GLB007-000092 (July 2018)

5G Service Provider Tracker: 2Q18, GLB007-000101 (July 2018)

Author

Paul Lambert, Senior analyst, Service Provider Markets

paul.lambert@ovum.com

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