The Department of Justice wrapped up an investigation into eSIM technology in the US, and the results could leave companies like Google, America Movil and Charter Communications smiling.
That is, if the global wireless industry actually makes the changes it told the DoJ it would.
At the heart of the issue is exactly how regular cellphone users switch from one network provider to another. Right now they often buy an entirely new phone when they switch from, say, AT&T to Verizon. But if they want to avoid buying a new phone, they can switch carriers by taking the fingernail-sized SIM card out of their phone and replacing it with one provided by their new network operator, if they have a compatible device.
New eSIM technology promises to eliminate the need for paperclips, tweezers and magnifying glasses by allowing consumers to switch providers with just the click of a button. And, if the DoJ's full eSIM vision takes root, consumers in the future may not even need to do that -- instead, they might just automatically hop to the network with the cheapest service or best coverage.
This is why companies like Google, Charter and America Movil's TracFone are likely watching the DoJ's actions with interest. It's also why AT&T and Verizon have been fighting eSIM.
Worries over collusion
The GSMA -- the trade organization for the global wireless industry -- first started working on eSIM technology in 2011. By 2017, according to the DoJ, the GSMA began boasting that the technology "can benefit consumers through increased competition among wireless service providers -- by enabling disruptive new entrants, by reducing the friction involved in comparing and switching wireless carriers, and by making it easier to choose a wireless provider that does not have a nearby physical location."
However, according to the New York Times, this was all simply too much for AT&T and Verizon. The two operators control roughly 70% of the US wireless market, and are keen to shore up their respective positions against the likes of challenger T-Mobile, Google (with its Google Fi MVNO), and cable company Charter (with its Spectrum Mobile MVNO that could be reinforced with a Charter-owned wireless network).
(It's worth noting here that neither AT&T nor Verizon provided comment to the NYT on eSIM beyond a GSMA statement about remaining "committed to a consensus-driven approach that protects all groups.")
As the DoJ explained, AT&T and Verizon in 2016 voted against new eSIM implementations by the GSMA that would have further relaxed the connection between operator and phone. The telcos lost the vote, the agency said, but that didn't stop them.
"The North American operators would not accept the outcome," the DoJ wrote. "Instead, the North American operators used their regional GSMA group to start a separate process, which was completely devoid of non-operator participation, to make the rule mandatory in North America only."
And that's about when the DoJ began its collusion investigation into the issue.
The problem here, according to the DoJ, is that the GSMA's standards-setting process is completely controlled by wireless network operators like AT&T and Verizon. This allows them to basically collude within the association in an anticompetitive way.
"It is therefore imperative that the process to create that standard is designed with due process safeguards that promote competition on the merits during the process of setting the standard," the DoJ wrote, noting that standards-setting organizations like the GSMA play an important role in the development of new, interoperable telecommunications technologies, but that they need to be careful how they conduct themselves. "Safeguards prevent a single interested group from hijacking the process, keeping the focus instead on goals that benefit the industry and consumers overall."
AA.35 to the rescue
As a result of the DoJ's investigation, the GSMA agreed to implement new procedures designed to open up the association's standards-setting process to companies beyond network operators. The agency said the new procedures, collectively dubbed AA.35, haven't been approved yet, but are designed to "remedy its operator-dominated process for promulgating standards."
Specifically, the GSMA agreed to create a two-stage process for setting standards. One group will create technology standards like eSIM and another, separate group will approve those standards. Both groups will contain both wireless network operators and non-operators, and the group approving the standards will require separate majorities of both operator and non-operator GSMA members.
"It remains to be seen whether AA.35 will, in effect, ensure that all interested parties have the opportunity to participate meaningfully in developing standards at GSMA that benefit consumers," the DoJ acknowledged, adding that it will "closely observe how AA.35 is applied and whether it succeeds in promoting interoperability without marginalizing non-operators' ability to represent their interests in preserving the maximum freedom to respond to consumer demand for innovation."
Analyst Roger Entner of Recon Analytics noted that the DoJ is basically moving away from the eSIM issue without taking any real action, and that the agency's letter on the topic contains no real legislative teeth.
What's interesting in all this is that eSIM technology could be used for more than just a digital replacement for a physical SIM card.
As the DoJ noted, the eSIM standard opposed by AT&T and Verizon could have also allowed users to maintain two separate eSIM profiles on one phone, like using T-Mobile for personal calls and AT&T for work calls. Apple currently offers this kind of work/personal separation via its implementation of the eSIM standard, but it requires an unlocked phone in order to maintain two phone numbers on two different carriers.
The other and potentially more interesting eSIM application involves dynamic or automatic switching. As the DoJ wrote, this technology would be a competitive threat to established wireless network operators "because it could lead to a service where a device efficiently selects, on behalf of the user, which profile to use in any given situation. For example, the eSIM could switch services if it detects stronger network coverage or a lower cost network, providing consumers with better or less expensive service."
Already the Google Fi MVNO provides this kind of service in the US by automatically connecting customers to whichever operator provides the best signal -- but only T-Mobile, Sprint and U.S. Cellular support Google Fi in the US.
Implications for MVNOs and others
As analyst Entner explained, the DoJ's actions on eSIMs could potentially affect almost any US MVNO, from Charter to America Movil.
For Charter, eSIM technology could allow the company to automatically push its Spectrum Mobile MVNO customers from Verizon's network to a Charter-owned network running in 3.5GHz CBRS spectrum. Indeed, Charter's CEO said earlier this year that the company is interested in broadening its mobile capabilities "using a combination of dual SIM technology and unlicensed and potentially licensed spectrum."
And for America Movil -- the biggest MVNO in the US with around 21 million customers -- eSIM technology could have significant implications. As Entner explained, America Movil could use eSIM phones across its various US MVNO brands like TracFone and Straight Talk to dynamically move customers to whichever network operator is providing the best wholesale rates. Enter explained that America Movil has been slowly working to move its customers mainly from AT&T to Verizon by selling them new phones. He said eSIM technology could allow the company to move up to 21 million customers from one provider to the other virtually overnight.
And those may not be the only companies interested in what eSIM might do. For example, Apple filed a patent application in 2011 for a "virtual SIM" a year after the Financial Times reported the company was facing opposition from Europe's wireless operators on the topic. Apple's recent embrace of eSIM across its iPhones and Watches could be another step on a longer path for the vendor.
Officials from Google, Apple, Charter, Altice and Comcast either declined to comment or did not respond to requests for comment from Light Reading on the DoJ's eSIM update.