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Apple ( AAPL ) makes things easy, a big reason the iPhone is so popular. Soon, things might get easier for iPhone users in one major respect: They might be able to switch wireless service providers as easily as they change socks. Alphabet ’s ( GOOGL ) Google could do the same. It’s not a day that leading wireless-services providers AT&T ( T ) or Verizon Communications ( VZ ), which strive to retain their customers, are looking forward to. Some observers say this could lead to the next step, which is Apple and/or Google actually offering wireless services themselves by leasing a wireless network from a carrier, though there has been no indication that such a move is planned. The easy-switch technology probably will not be included in Apple’s next smartphone, the iPhone 7, due this fall. But it might happen with the following iPhone, and the wireless industry might never be the same. The basic idea is that consumers no longer will need to visit wireless firms’ retail stores, where they sign up for service, and where a salesperson then inserts a tiny “SIM” card into a phone. That tiny SIM (subscriber identity module) card, often found under the battery, provides access to a wireless network. Instead of this scenario, consumers would buy a smartphone directly from Apple or Google. Built into the phone would be reprogrammable software that provides network access. Analysts call it a smart SIM, an electronic SIM, a soft SIM or a virtual SIM. In any case, it does what the conventional SIM does, but it’s embedded in electronic wiring that doesn’t have to be swapped out. Soft-SIMs Are A Nightmare For Carriers Aside from Apple selling its own wireless service directly to consumers — a potential worry at some point — putting a smart SIM into iPhones is the most “destabilizing thing” that Apple could do to wireless firms, says Strategy Analytics. “We expect the first smartphones with embedded-SIM cards to emerge worldwide in 2017,” Neil Mawston, an analyst at Strategy Analytics, told IBD. “We expect the Apple iPhone to contain an embedded-SIM by 2018.” With a soft-SIM, consumers could shop for the best wireless data plan and switch service providers instantly. They would not need new phones or new SIM cards if they switched service providers. And Apple or Google would be there to help with any issues. “Soft SIMs have always been the nightmare scenario for wireless carriers,” Craig Moffett, an analyst at MoffettNathanson, told IBD. “Anything that lowers switching costs and reduces brand loyalty is bad, and soft SIMs would do both in spades.” Most consumers still buy iPhones and other devices from wireless firms, and nowadays they usually buy a phone in monthly installment payments. But Apple rolled out its own iPhone-upgrade financing plan last September. Samsung has also explored the model. In China, selling phones directly to consumers is how fast-growing Xiaomi does business. It probably would not make sense for wireless firms themselves to sell e-SIM-equipped smartphones that make it easy for consumers to switch service providers at the drop of a hat, analysts say. They don’t want their customers switching. On the other hand, offering an e-SIM could give consumers more reason to purchase an iPhone from Apple or an Android phone from Google or Samsung. AT&T declined to comment for this story, and Verizon didn’t respond to requests for comment. “Apple and Google might try to become more aggressive using smart SIMs that play each carrier off one another for the lowest priced service,” speculated Oppenheimer’s Tim Horan in a research report. He says it’s unclear, though, whether Apple or Google would then take the next step — morphing into an “MVNO,” a reseller of wireless services. The idea that Apple or Google might become a wireless-services provider isn’t new. In January, consulting firm McKinsey noted that “in 2011, Apple was granted a U.S. patent to create a MVNO platform that would allow wireless networks to place bids for the right to provide their network services to Apple, which would then pass those offers on to iPhone customers. ” McKinsey points out, however, that because wireless firms are still important distribution partners for Apple, the company has been careful about using smart SIMs. Apple Tests New SIMs In iPads But Apple has been innovating with SIMs in its iPad tablet-computer products. In 2014, Apple built the “Apple SIM” into iPad Air 2 and iPad Mini 3 tablets sold in the U.K. However, U.S. Strategy Analytics says those initial Apple SIMs were still physical SIM cards, installed at the factory. Apple last month launched its 9.7-inch iPad Pro, along with its iPhone SE. What’s different about the new iPad Pro is that SIM circuitry is embedded in the device and is no longer removable. The new iPAD’s e-SIM could be a precursor to a smart SIM in an upcoming iPhone, says Strategy Analytics. In 2015, both Apple and Samsung were reported to be in talks with an industry standards-setting group called GSMA. The industry group has been developing standards for e-SIMs embedded in consumer electronics such as phones, as well as for the “Internet of Things.” IoT refers to wireless technology that connects industrial, medical, automotive and consumer devices to the Web. Many wireless firms, including AT&T and Verizon, see IoT as a big growth opportunity, and e-SIMs would make sense in some applications. In March, U.K.-based Vodafone Group ( VOD ) said it’s working on e-SIMs with Germany’s Giesecke & Devrient for IoT markets. At the Mobile World Congress in February, Samsung rolled out a smartwatch, the Gear S2. The Gear S2 featured a built-in smart SIM. Apple’s smartwatches do not yet have their own cellular links to wireless networks and rely on nearby iPhones for Internet connectivity. The GSMA is still in talks with wireless phone companies and aims to release an e-SIM standard for smartphones this year, analysts say. “The Apple iPhone 7 will almost certainly not have an embedded-SIM,” said Mawston. “Operators are still resisting, while Apple remains publicly undecided on whether to continue supporting its own Apple SIM or the GSMA standard. We think the uncertainty surrounding embedded-SIMs in the short-term means Apple will hold off on the iPhone 7 for now.” Market research firm Ovum, in a February report, said that “given Apple’s support of the e-SIM specification, it is seems likely that Apple’s products will also feature embedded SIMs in the very near future.” Ovum, though, says wireless firms might not fare as badly as some pundits predict, depending on what the GSMA’s smart-SIM standards look like in the end. “An extremely polarized scenario could see OEMs (smartphone makers) selling connectivity via their application stores in the form of apps and charging end users either directly via carrier billing or via their accounts such as Google Play and App Store,” said Ovum. “This is a pretty scary scenario for mobile operators, and surely the GSMA’s standardization activities will try and avoid this from happening. “Commercial tweaking — and in some cases stiff negotiation — are sure to take place before the reprogrammable e-SIM will seriously disrupt existing players in the mobile industry, but it is useful to acknowledge that, from a technology point of view, the building blocks have been laid.” Scalper1 News
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