Imagine the ideal consumer phone plan

Take a second to daydream about a single phone plan, yours; the best of all possible worlds.

Imagine a phone plan which :

  • Connects to the best network signal available, be that Telstra, Optus, Vodafone or a free local wifi signal.
  • Helps you manage your data usage, proactively cutting it 30% off the GB used over cellular networks.
  • Refunds your unused data at the end of the month in the form of a credit to your bill.
  • Helps you change providers, offering the facility with a couple of clicks rather than a trip to Coles for a new SIM.

Who would buy a phone plan like that ? Possibly everyone. Especially if it was offered by Apple and / or Google, brands they trust which likely already provide the operating system on their phone.

Who got the value from TV, Music and News when they were digitized?

The first 3 industries to be digitized were TV, Music (including radio and other forms of audio like Podcasts) and news. The major internet companies extracted most of the value from those industries by becoming (a large proportion of) the platforms consumers’ use to access them. Google bought YouTube, Apple launched Apple TV. Apple run iTunes and Google has its Google Play facility. Facebook & Google are now the first way I get my news.

Internet companies look likely to do the same to the telecommunications industry, next. Apple and Google share a strategic advantage in innovation and analytics to hone their products. They have brand people trusts, they can leverage that and the network effects of their existing internet dominance to broaden the array of products they provide.

The final step of telco is just about to be digitised

The eSIM is an embedded SIM. eSIMs will soon start to replace physical SIMs in our connected devices. Critically, the eSIMs are also the final step in the digitization of the telecommunications industry. Given their track record of sucking the value out of digitized industries, it could be that the eSIM will make telecommunications interesting to the internet giants.

If that was true, the first steps would, by now, be evident. So what are they doing about it?

Apple’s behavior in telecommunications

Putting aside for one moment the fact that the iPhone is the most successful gadget the world has ever known.

  • It was Apple which lobbied the global standards authority to push for the launch of the eSIM :
    Apple were behind the Nano SIM, now the standard SIM size for higher end phones. Additionally, Apple have spent a decade convincing the GSMA, the organization which dictates standards to phone companies around the world, to develop and implement the eSIM in to telco. That’s a significant investment of time and resources – so there must be something in it for Apple.
  • Apple have experimented with eSIMs in previous device launched :
    Apple have used various versions of the eSIM in devices since 2012. iPads and MacBooks have both contained adapted versions of the eSIM – sometimes known as an ‘Apple SIM’. The capability seemed of little use to the customers who tried it, the devices were a commercial failure. However, Apple will have learned lessons from the experience (lessons no other telecommunications player has) that it can apply to later eSIM enabled devices.
  • The Apple Watch :
    The 2017 Apple Watch (3) contained an eSIM and has sold incredibly well. Unlike it’s predecessors, the Watch has been successful. 20 million are now in market.
  • May want to be an MVNO :
    Despite Apple publicly denying their intention to launch as an MVNO (Mobile Virtual Network Operator – a smaller phone company which resells the network for larger phone companies) industry rumors suggest they may actually launch an MVNO before long.

Google’s eSIM Approach

Just as Apple has the iPhone Google has the Android operating system and are quietly building capability in telecommunications.

  • Google are already a phone company:
    In the USA, Google operator ‘Project Fi’, a single phone company which resells the networks of three of America’s largest telcos including Sprint, AT&T. Their express intent with ‘Fi’ was to stimulate innovation in telecommunications. ‘Fi’ refunds unused data at the end of the month (a technique which might well have the effect of encouraging more data usage, in the same way that making petrol 30% cheaper would encourage more car journeys.)
  • Google have already Used the eSIM in the Pixel:
    Google acquired around half of HTC, the phone manufacturer in 2017 and added an eSIM manager app to their phones at the time of release. In line with its hardware ambitions in general, Google seem likely to produce more phones than ever before in the year ahead.
  • A slew of Apps which surround mobile:
    Simultaneously, Google have launched some new apps recently which appear designed to improve phone user’s customer experience, especially in the management of data. Datally, for example, advises users when WiFi hotspots are near so they can perform downloads there rather than over the more expensive cellular networks.

Bringing it all together

We’re moving towards a world where everything is connected to the internet – An Internet Of Things in which our watch, car, child’s backpack and Fitbit are all online all the time. The market is at an inflection point with forecasts for growth of connected devices in 2018 similar to those we saw when SmartPhones became popular more than a decade ago. The market for Fitbits and mobile broadband connections, for example are set to grow around 40% I just the next year alone.

Now seems like a natural time for Google and Apple to leverage the position they currently hold in telecommunications and strategic advantage they already have generally. Could 2018 be the year in which they use the digitization of the SIM to extract a large part of the value from the sector, as they have with other digitized industries, including TV and Music.

Interestingly, while this happens, most phone companies are focused on each other. They report quarterly numbers in which they describe stealing each others’ customers, spending $millions on content rights, even building new networks. Google and Apple’s movements suggests that internet companies may well to sneak up on them and few telcos will be able to compete.

Finally, with APIs opening for banks, the final step in the digitization of that industry, financial services could be next.