The Challenges to True Roaming

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As a regular business traveler - and therefore one who regularly pays roaming fees or swaps SIM cards on my iPhone - I am attuned to the shifts in the mobile telecom market. One of the issues that has come to occupy my attention recently is the lack of multi-SIM cards.

Although we call them "SIM cards", the physical card we stick in our phone is actually called a Universal Integrated Circuit Card, or UICC; it is, essentially, a very small computer, just like your laptop or iPhone. The Subscriber Identity Module, or SIM, is actually an application that runs on the card, just like Facebook or Messages on your phone, or Chrome on your laptop.

Just like your computer can run multiple applications - using Chrome does not obviate installing and using Firefox - a UICC can run multiple SIM applications at once. Thus, there is no reason why a single physical UICC card could not be registered with both AT&T in the United States and Vodafone in the United Kingdom. Without ever swapping cards, and without actually roaming, your phone could just work as a local Vodafone phone when in London and a local AT&T phone when in San Francisco.

Not only would you no longer need to swap SIM cards on the airplane (and hope you don't lose them), but you could, if you choose, receive and send calls using your AT&T account when in London or Vodafone in San Francisco.

So why has this not been done, and what are the challenges to date?

There are essentially three roadblocks in the way of doing this:

  1. Revenue
  2. Relationships
  3. Complexity

Revenue

When you roam - whether from the US to China or France to Germany - the very high roaming fees are pure profit. The additional cost to the carriers, your home carrier and your visiting provider, of providing roaming services and voice routing are infinitesimal, on the order of $0.01 / minute or less. When they charge you high roaming fees, the gross margins are enormous, and are largely shared between your home carrier and the one providing the service in the country you are visiting.

Neither carrier wants to give up on this revenue stream.

Competition, however works wonders, and is beginning to do so.

  • WiFi is available in many places, especially city centres densely populated with hotels and coffee shops. With so many VoIP apps like Skype, Google Hangouts and FaceTime, and text messaging like WhatsApp, iMessage and Kik, the need for an actual number with minutes is becoming less important.
  • Since the roaming revenue is, essentially, all profit, there is plenty of room for competitive carriers to drastically cut the profit to gain market share. For example, T-Mobile USA already offers free data roaming overseas in most developed countries.

As the value of roaming revenue drops, and more business-savvy travelers swap SIM cards for local cards, the revenue impediments to opening up the network are slowly disappearing. Of course, if the additional cost of roaming becomes small, customers may never even switch SIM cards. Many business travelers, however, want local numbers when in-country.

Relationships

Carriers like to believe they have a direct relationship with customers. As such, they are not willing to program customer-provided UICC; instead they provide the physical card to customers. This requires the customer to either enter a store or receive the card at home/work, which requires providing the carrier with a name, address, preferences, etc. The cheapest customer to get is the one you already have. Carriers use this information to upsell and cross-sell, and believe that the personal touch keeps churn down.

As an aside, I have yet to see any data that shows how the touch affects churn one way or the other, and I suspect the carriers have not either.

Further, in a competitive market, where the service provided is between my phone and a Web site, or my voice and my friend's, the only real differentiators holding customers in place are:

  1. Price
  2. Quality of voice/data service
  3. Customer service

Carriers would do a far better job reducing churn by focusing on these three, rather than the ephemeral "personal touch relationship."

Complexity

Purchasing an open UICC and then having the carrier "program it" for you is complex, far more complex than 99% of carrier customers - or even carrier store employees can handle... for now. Over time, however, such complexity is likely to disappear. It used to be difficult to set up email; now it is a breeze. I even recall days when just connecting t the Internet required "installing a TCP/IP stack", the software for enabling Internet-type communication. that never stopped the early online providers, and today it comes standard on every piece of connected technology.

So Where Will It All Go?

I predict a few trends. As an economist always says, "on the one hand, but on the other hand." I may be right, I may be wrong.

  1. Roaming will get cheaper. Competition for travelers combined with free WiFi will slowly but inexorably drive roaming rates down, until infrequent travelers will just drop an extra $10 to their carrier before going to get free data roaming for a week or two.
  2. Some carriers will focus on real service, hopefully pushing others to as well. There is already such a trend, as mentioned, with T-Mobile USA, who say they always look for "what else can they charge less to their customers for."
  3. A few carriers will agree to programmable SIM cards, primarily those looking to expand networks and get the technically literate on their side. With the improved relationships and reduced churn provided by better price/service combinations and cheaper roaming, some carriers will be willing to offer programming for SIMs.
  4. The programming of non-carrier-provided UICC with a SIM application will lead someone smart to figure out how to do it entirely in software, first in Android and eventually in iOS. This will lead some wireless carriers to be like your email provider: configured on your phone. You might need to download a file or enter more complex information, but the principle will be the same. The adoption of "soft SIM" by a few advanced carriers will lead to growing demand from others.
  5. Eventually, with the removal of the "physical shackles" of the SIM card and the already growing pre-paid market removing the bonds of multi-year commitments, carriers may eventually focus on good price/service combinations.
  6. Consumers may have to look for a new favourite industry to hate.

Hope for the future...