Agenda

• Introduction to SIM card

• How OTP can bypass operators

• SWOT

• TOWS

• AOM

Introduction to SIM Card

• Subscriber Identify Module & UMTS

– UICC - Universal Integrated Circuit Card

– A Smart card with memory and capable of running USIM application is used in

UMTS networks

– Stores ICC-ID, IMSI, Ki, LAI & Operator specific information (GSM11.11)

• Different form factors

– Mini SIM

– Micro SIM

How SIM card works

• Key is the IMSI (International Mobile Subscriber Identity)

• First 6 digits identifies the mobile network. The radio network will check

the first 6 digits and then forwards the data to network elements. (If it’s

roaming it is fine as long as there is a contract with the foreign operator)

• Authentication keys are secret and typically the manufacturer (some times

operator) knows them and the keys are stored in the AuC (HLR)

• These are the fixed parameters and the rest can be changed/managed by

the operator or 3rd party or the end user

• If need to change remotely then there are lot of security considerations

and 3GPP is still working on the standards to “remotely modify the

parameters”

Agenda

• Introduction to SIM card

• How OTP can bypass operators

• SWOT

• TOWS

• AOM

How OTP players can bypass operators

• If Apple or other smartphone manufacturer wants to take full (or majority)control, it can be done in few ways. Below are the relatively easier

ways to do

• Remotely change the SIM card parameters

– Apple can implement a system with iTunes

– New subscriber just logon to Apple Store and purchases the iPhone (with SIM card)

– Activate via iTunes. IMSI + Ki will be based on the operator selection. Apple need to get the IMSI & Ki from Operator

– When the subscriber need to change operator then the same process via iTunes.

– Similar to App Store where Apple managed to bypass Operators.

– If subscriber chooses to have post paid plan + voice plan, then he still need to have a contract with Operator.

– If subscriber chooses pre-paid, he still need to purchase from Operator.

– However for pre-paid, it can be Apple can become a mediator. i.e. Apple purchases the volume or time from operators and let users select via iTunes.

• Apple to get their own IMSI & Ki from SIM card manufacturers

– Apple provides Apple SIM cards

– Apple will have roaming agreements with all operators

– Subscriber can purchase the data volume from iTunes based on volume or period (1GB or 1day). However this is Pure DATA plan only.

– To provide voice plans, Apple can use “facetime” which is tested and enjoys prioritized QOS from various operators

– It will be able to fully bypass operators from the PS value chain as the control is completely within Apple

– Apple can provide substantially cheaper roaming deals to iPhone sub. They may even sell backup or redundancy. (if StarHub network fails then sub

can auto switchover to SingTel)

– The biggest challenge for Apple would be the “roaming agreements” and friction from Operators.

Agenda

• Introduction to SIM card

• How OTP can bypass operators

• SWOT

• TOWS

• AOM

SWOT-1

Strengths

1. Standards should be ready pretty soon. Able to start in the near future

2. Bypass Operator for the activation but not head-on with operators

3. Somewhat similar to Amazon operations model (Kindle charges are globally managed by Amazon)

4. Major economies supporting ‘Net neutrality’ and OTP’s can benefit

Weaknesses

1. Subscriber still bound to Operator contracts and no full/real control for Apple

2. No additional streams of revenue3. No experience with prepaid charging, not able to

offer bundled charging (no complex rating engine)

Opportunities

1. Better bargaining power with operators2. Potential “incentives” for apple subscribers in

roaming deals based on prepaid tariff3. Preparation to move towards ‘Open market’

where Apple can become largest mobile operator.

Threats

1. Regulatory constraints and operator hostilities2. Administrative and compliance issues with

roaming contracts, charging methods and maintenance of iTunes

3. Delay in standard ratification and security issues (like RIM)

SWOT-2

Strengths

1. Complete control of end subscriber and totally bypass Operator

2. Own IMSI and own Ki hence and able to manage resources much better

3. Similar to MVNO operations hence established process & ‘know how’s’

4. Major economies supporting ‘Net neutrality’ and OTP’s can benefit

Weaknesses

1. No voice plans and need to rely on apps like FaceTime or VoIP or 3rd party tools

2. Not yet standardized in 3GPP3. Subscribers not willing to be “locked” by device

manufacturer4. Potentially higher charges compared to ‘local’ TELCO

charges5. Complex and highly bureaucratic roaming agreements

with operators6. No experience in TELCO business and no control over end

to end Network (operator network still will be in the value chain)

Opportunities

1. Disruptive model with competitive service offerings and new avenues for revenue in roaming business

2. Offer value added services and potential ‘redundancy/backup’ plans for business groups

3. Open new markets in M2M and other new technologies

Threats

1. Regulatory constraints and extremely high hostilities with operator

2. Need to setup infra to support and need to become almost a mobile operator

3. Duplication from competitors and deviation from Apple core business

4. M2M or new technologies may be saturated by operators

Agenda

• Introduction to SIM card

• How OTP can bypass operators

• SWOT

• TOWS

• AOM

TOWS-1

SO (Maxi-Maxi)

1. Lobby for net neutrality and push for open markets

2. Bargain with operators by leveraging scale of iPhones in network

3. Offer cheap roaming rates to pull subscribers to use pre-paid roaming

ST (Maxi-Mini)

1. Be a MVNO or small operator in one nation to have roaming agreements with Operators

2. Promote VoIP and target LTE (all data network)

WO (Mini-Maxi)

1. Bundle pre-paid data for additional stream of revenue

WT (Mini-Mini)

1. Start a MVNO to overcome regulatory limitations and mutual roaming agreements if any.

2. Provide bit pipe for subscribers (no class of service) and pure data transmission service

3. Encroach in pre-paid market

TOWS-2

SO (Maxi-Maxi)

1. New service offering which operators cannot compete due to regulation and interconnect agreements

2. Entice new class of users from Businesses with new model (e.g. Redundancy, cheap etc)

3. Encroach new domains and capture market share

ST (Maxi-Mini)

1. Own IMSI and be a small operator (like offshore banking)

2. Infra can be leased from operators similar to Cloud services

3. Target ‘apple’ or ‘otp’ loyal customers to overcome the friction from subscribers

WO (Mini-Maxi)

1. Head on with operators but build a strong base of loyal users who push operators to accept apple in the network

2. Agree same or similar prices with local operators based on Apple volumes and sub base.

3. Focus on LTE markets first to gain foothold and publicity

4. Wholesale roaming agreements similar to M2M operators (e.g. jasper, fujitsu)

WT (Mini-Mini)

1. Setup or lease infra for VoIP or Voice calls2. Create a new standard and make the entry to

market more complicated for competitors/replicators

Summary• In summary, APPLE or a OTP with strong market presence and customer loyalty can launch a product

and bypass Operators totally for Data business

• Google may be a bigger player given the ‘android’ outselling iPhone and open nature combined with Google Voice.

• Commercial services (Telenor, Jasper etc) are available with fixed SIM in M2M space

• Similar concepts (e.g. Soft SIM) may gain momentum

• There are strong benefits to end customers in terms of roaming charges and cross bundling which can be positive for Apple

• Recent threat from EU operators (removing subsidies for iPhones) may not be valid in the future.

– Apple can simply offer an interest free 24 month equipment loan

– Reduce prices and margins to get money from usage

• LTE can be a big game changer as the focus is on DATA

• Net neutrality initiatives and GSM work items are favoring Apple/OTP

• Major obstacle or hindrance to the plans of bypassing operator would be

– How strong Operators can stop Apple from coming in to the market

– Remove the QOS for Apple Apps and no longer offering preferred treatment

– Regulatory restrictions/lobbying

– Subscribers becoming ‘anti-OTP’ due to the perceived ‘locking’ or other soft aspects

AOM

END

Other Considerations-I

• Standards are not ready yet. So if Apple were to launch they need to wait for 3GPP to ratify which

would be around 2012. Until then there is no way Apple can launch a proprietary solution as EU

mandates all equipment must comply to 3GPP

• How many people would be interested in Roaming. Today what % is roaming and how much

revenue they are getting? If Apple offers similar charges worldwide how many people are willing

to go for it (sure the charges would be slightly higher than local data bundling)

• How about the Regulatory concerns. E.g. LI, or other reporting.

• Telenor launched e-sim http://social.telematicsupdate.com/content/telenor-connexion-deploys-

esim)

• How about cust care? If there is a problem with SingTel in Singapore, does the customer expected

to call SingTel or Apple. It should be Apple as the purchase is from Apple, but does Apple or other

OTP’s have necessary skills and resources to manage global customer care?

• May be end up like different SIM’s for different reasons (Soft SIM for embedded consumer

devices, soldered or fixed SIM for M2M, Built in SIM for some who like complete control over the

phone/equipment, )

Other Considerations-II

• Compete with OTP’s is not an easy task given their global reach, scale and perceived value from

end customers. (Today people are happy to wear Apple or Google t-shirt and they are seen as ‘cool’ . Why we don’t see any

SingTel, StarHub or M1?)

• Innovation in TELCO’s is driven by vendors typically. To head on with OTP’s we need to built or

convert our existing networks to “Innovation-ready networks” where new applications can be

launched with bare minimum cost to the operator. Today new application launches typically takes

months and costs five figure sums. It should be weeks or days and less than few thousands.

• Local regulator might force operators to share the radio network or Operators go for sharing

agreements which challenges OTP position of redundant networks (e.g. TRAI evaluating it in emergency

services or disaster recovery for telco’s. Or like in Finland the 2G, 3G, LTE sharing between all operators)

• Bundled roaming plans across the regions or new agreements to reduce the roaming charges

across regions. Roaming is still very much limited to specific destinations hence operators can

offer customized or cheap plans.

• Explore virtualization and modular architecture to enable long tail services with a proper

framework to remove failed services quickly.