A little slip up from Verizon’s CFO Fran Shammo has pretty much confirmed earlier rumours of Apple’s collaboration with Gemalto that will see the iPhone 5 capable of being remotely provisioned eg. operating with and without a SIM card.
The difference this will make from the customer and operator viewpoints is enormous and I can see it having a massive impact on the mHealth market going forward so I thought I’d describe the change and outline the major opportunities I think it will give rise to.
Software reconfigurable SIMs will enable customers to buy a device online or in an Apple store, take it home and plug it into iTunes before deciding which operator they would like to use. This would also enable the customer to bring their call/messaging/data plan together with their device purchasing/insurance and AppStore purchases into one single billing point (the Apple AppStore).
Additionally customers could have their network selected for them automatically based or parameters such as time of day, cost of call, quality of call, bandwidth latency, country they are in, etc.
With end to end control Apple could also enable customers to set their connectivity to follow them on their preferred device eg. in the home a Facetime call could reach you via your WiFi connected iPad but grab your iPhone 5 and it’ll seamlessly switch to that enabling you to take the call with you on your way out the door. This could also offer significant security/data privacy advantages.
Why would Apple want to do this?
To appreciate this you need to understand where the money is made in mobile, for these I’d recommend reading the work of mobilist Tomi Ahonen. In brief: The mobile industry was worth $1,180 billion last year (up 9% from the previous year), but only 14% of it was made in the device side whilst 78% was made in the ‘services’ side of the business (mostly counted in the bottom line of the mobile operators/carriers).
What impact could this have?
The most obvious impact will be the change for the major mobile operators. Their lucrative provider relationships with tens of millions of the highest spending mobile subscribers could start to be replaced by a more competitive B2B relationship with the device maker (who will then resell the minutes/texts/data to its customers).
Evidence that mobile operators are preparing for this move can already be seen in reduced or removal of support and promotion of Apple devices and greater promotion/focus by operators on the various Symbian/Android/WP7 alternatives.
How will this effect mobile operators?
As some of their most valuable consumer relationships begin to fade there will be massive revenue and loyalty losses. This will without a doubt encourage them to focus on areas where they can add value or reduce costs. I’d expect more:
> Network sharing deals. Telcos could act to limit the impact the value Apple could add (as effectively network sharing enables customers to roam between networks at will)
> Network exclusive devices. With huge mark access telcos will continue to have the pick of innovative devices/services and increased commercial pressures could encourage the creation of more adventurous partnerships than we’ve seen to date.
> Focus on customer needs. There will continue to be plenty of customers who haven’t got and/or have no intention of getting an iPhone and this wake up call will drive operators to realise they can’t survive as just pipes and must get more focus on neglected opportunities such as the senior, mHealth and M2M markets.
How will this improve the user experience?
Until now the user experience advances that Apple have been able to bring to the market have been limited by their control of the device only and limited control of operator decisions. Because until now these opportunities have rarely be leveraged it may be difficult to see the opportunity so here are a few of examples of where the operator control would be able to enable new services, revenues and customer loyalty:
Automatic OTA Updates: A big bug bear for lots of iPhone customers is the need to connect it via a USB to a PC/Mac running iTunes in order to register or update the OS. Control of the network will enable Apple to deliver these over-the-air without the user inconvenience. This will also enable incremental updates to be made as required which should be advantageous when it comes to security patching etc.
Visual Voicemail: Despite being launched by Apple in 2007 this still hasn’t made it to most mobile operators because it requires a network implementation that’s outside of the control of the device maker. Operators around the world continue to use their unpopular and incredibly outdated (they are designed for use without a screen) existing voicemail services because they can’t justify the implementation of “nice but not essential” services because they don’t make money from them straight away (when churn is making the biggest dent on operating profits you’d imagine this wouldn’t be so important), customers aren’t complaining (can you blame them when it’s clear the operators are just competing on price?) and they aren’t expressing interest (how can you expect this when they can’t see/try the service?).
Multinumber and Data Plan sharing across devices: Want an additional number? Want to use your iPad using the data plan you already have for your smartphone? Like to answer your mobile on your homephone/PC/iPad? Just some of the additional benefits customers can enjoy as a result of the SIM being freed. I’d be very surprised if this didn’t have a massive impact on tablet sales: helping Apple sell higher spec iPads (as currently ~80% are plumping for the WiFi only version largely due to lack of interest in that second data plan) and discouraging customers from buying Android Tablets featuring SIM cards as these will be much less competitive (as they require 2x data plans to achieve the same connectivity) and WiFi only Android tablets will continue to flounder (as without the network subsidies there is little incentive for sales promotion by the carriers).
A really positive development from this will be the growth of network operators offering multi SIM contracts. SIM cards in my electronic driveway gate, home alarm, weighing scale, etc, that are manageable on the same mobile plan will drive lots of innovation.
Multiple device data use monitoring app: With greater control of your data plan will come a greater need to understand how and when you’re using it. Expect Apple to innovate here with a data meter similar to what you have with your battery/signal indicator. The primary mobile is the ideal place to host this control point.
Theft: Remote control of the device may raise some privacy concerns but it’ll be a great way of ensuring stolen iPhone 5’s have much lower resale values. This will be key to adoption by individuals who may otherwise find a high value electronic device makes them more vulnerable to theft (eg. senior citizens) and will also enable much higher levels of authentication which will open up new roles (eg. mMoney and remote healthcare services etc).
Facetime: Although there are some ways to make Facetime work over 3G the official line is it only works over WiFi. This is another illogical concession made to appease operators who are worried about data volumes (yet sell unlimited data plans!). With control of the network there will be no need for the device maker to disable this feature which should encourage a lot more use of Facetime video calling and new use models eg. emergency video calls.
How could this effect the mHealth market?
In addition to the user experience advances that will be possible, complete end to end control of device and connectivity holds enormous potential for medical device manufacturers. This initiative by Apple should be a major precedent that will really help the M2M market develop.
By taking end to end control of connectivity and billing across a range of consumer devices Apple’s going to enable some incredible new opportunities in the home health market for independent developers and healthcare providers. This is a great thing as it’ll not only shine a light on how inadequate the current crop of dedicated devices are but it’ll also drive a lot more competition from consumer device brands not wanting to be left behind as appreciation of the size of the opportunity becomes clearer.