Regulatory Implications from the Introduction of the eSIM Victoria Falls, Zimbabwe 2017

1. Regulatory Implications from the Introduction of the eSIM Regulatory Implications from the Introduction of the eSIM Victoria Falls, Zimbabwe 2017 Simon Molloy (simon.molloy@skc.net.au)

2. Agenda • Evolution of the SIM Card • Disruptive Business Models enabled by the New Generation SIM Evolution • Likely timeline for eSIM adoption • Regulatory Issues and Responses

3. Evolution of the SIM Card • Since its deployment in the early 1990s, the SIM card has provided secure, identifiable and authenticated access to mobile networks • However, the traditional form of a physical, removable SIM card has become dated as technology advances – with a range of manufacturers including Apple, Samsung and others developing a range of products which move to eSIMs (particularly wearable devices) • Three types of ‘new generation SIMs’ have emerged in this process, namely: • Embedded SIM or eSIMs: a physical SIM that is permanently embedded in the devivce • Remote Provisioning ‘reprogrammable’ SIMs: SIM that can be removed from the device (e.g. Apple SIM) • Soft SIMs: collection of software applications and data that resides in the memory and processor of the device

4. Evolution of the SIM Card Examples of new generation SIMS A soft SIM would merely replace the sealed and reprogrammable SIM with software storage.

5. Evolution of the SIM Card Examples – Wearables and eSIMs

6. Evolution of the SIM Card • A critical feature of all these new generation SIMs is remote provisioning technology • This gives the consumer and/or supplier the ability to remotely change the SIM profile without having to physically change the SIM

7. Evolution of the SIM Card • To cater for growth in this area, in June 2016, the GSMA released its final embedded SIM specification for the M2M market, which was supported by 40+ players • This provides a single, de-facto standard mechanism for the remote provisioning and management of M2M connections, allowing the ‘over the air’ provisioning of an initial operator subscription, and the subsequent change of subscription from one operator to another • Phase 2 of the GSMA SIM standard, which allows for devices to be connected to the cellular networks without a smartphone, is due in late 2016 and will be released soon.

8. Disruptive Business Models enabled by the new generation SIM Evolution • The traditional SIM is an efficient mechanism to lock a customer to an operator (albeit weakened by SIM swapping, multiple devices and MNP if available). • The widespread introduction of the eSIM and Remote Provisioning technology is therefore likely to be an enabler for disruption, with the new technology: • Decoupling the handset and therefore the customer from the network and the operator • Giving device owners an enhanced ability to compare networks and select service at will directly from the device • Providing opportunities for consumers to choose networks based on criteria such as cost, network speed and quality

9. Disruptive Business Models enabled by the new generation SIM Evolution Key areas where MNOs are likely to see disruption

10. Disruptive Business Models enabled by the new generation SIM Evolution Disruptive Business Models enabled by new generation SIMs

11. Likely Timeline for eSIM adoption • It is expected that eSIM adoption will have a slow start • In 2017, deployment will mostly be proving the concept to allow operators and device manufacturers to gain experience of eSIM practicalities and refine implementation and processes • The market will then ramp up in 2018-2020 as cost, industry value-chain, user-experience problems and regulatory issues are progressively resolved • It is anticipated that by 2020, close to 1 billion mobile and IoT devices will ship with embedded, remotely-provisioned SIMs annually

12. Regulatory Issues and Responses: SIM card registration • SIM card registration is the process of recording and verifying mobile phone number(s) and personal information of a subscriber by a communications service provider. • eSIMs pose a potential problem for identification purposes as it removes an avenue for identification by eliminating the need for a consumer to buy their SIM card in person • While there are various remote provisioning approaches – the optimal approach to the registration and authentication of eSIM card and soft SIM in IoT/smartphone devices has not been resolved in any global market.

13. Regulatory Issues and Responses: Supporting Enhanced Competition • An exemplar regulatory regime which supports enhanced competition is likely to have the following features: • Mandating/Licensing of MVNOs instead requiring all MVNos to come to commercial arrangements with licensed MNOs. • Facilitating streamlined eSIM registration processes for both industrial use to IoT/M2M devices and smartphones subject to the resolution of interception and national security issues • Permit eSIM registration processes to be ‘portable’ across operators/MVNOs • Regulatory regime provides a transition scheme for an environment of users with physical and eSIMs including registration of physical SIM permits eSIM registration

14. Regulatory Issues and Responses: Supporting Enhanced Competition • An exemplar regulatory regime which supports enhanced competition is likely to have the following features: • No special or other licensing required by eSIM providers (if any develop) for the enterprise market or beyond; • Permit electronic re-verification of eSIMs (rather than physical checking) this could utilise on two factor authentication (‘2FA’) provided by inter alia Singapass or iSignthis; and • Facilitate access to regulated financial services following eSIM registration etc. in order to promote financial inclusion etc.

15. Questions