eUICC and the Automotive Industry: Fasten your Bootstraps
Whatever you have heard about connected cars, it probably seemed too good to be true. From galvanising the vehicle sharing culture, providing a new, transitional social sphere, or changing the structure of our cities, the average reader will most likely scoff and then scroll down to the next article about nano-bots curing cancer – a much more believable discussion point.
This is because our attitudes towards the automotive industry have been fixed by decades of brilliant marketing – the car for many people around the world is a dependable, beautiful, reliable and completely understandable concept. The car, quite simply, is an aspiration fully within the reach of the majority of people – the average reader sees their car as their loyal companion, not ‘that science guy from R&D.’ This is the dilemma facing car manufacturers now: how do you sell ‘Lassie 2.0’ without compromising the sweet spot the industry has been cultivating for the last century?
Both auto manufacturers and Mobile Network Operators (MNOs) have enjoyed a long and fruitful existence, during which time their existing business models have served them very well indeed and allowed massive market expansion and consolidation. However, attitudes around the world are changing, and as our society becomes more connected, less restricted by borders, and demands more and more after-market services, the business models that these two giants of industry have built independently will now need to be reimagined to fit a collaborative, consumer-savvy world.
Part of this change in attitudes will require both automotive companies and MNOs to reassess their relationship together, which during the early development of telematics services faced challenges due to misunderstandings between MNOs and automakers. The perceived gap between the connectivity and automotive spheres now needs to close, for the sake of both these industries – MNOs must evolve to meet changing data requirements and vehicles must become connected to remain relevant in today’s fast-paced, climate-conscious consumer environment – but this requires full commitment from both sides, and an understanding of the mutual benefits connected vehicles will bring.
The Challenges Facing Connected Cars
The crux of the problem is that both parties are at a stalemate in terms of innovation, and when combined the problem only intensifies. For the connected car to take off, vehicle manufacturers must anticipate consumer demands years into the future, while also navigating the various releases and technology standards emerging in the connectivity sphere. This reliance on non-existent technology arriving in time to develop the ol’ faithful of the future has forced designers and manufacturers to work from legacy standards, hindering proper development and integration with the product. Lack of meaningful change and return on investment (in 2016, the top 10 vehicle OEMs (Original Equipment Manufacturers) returned just 4% on their investments) also has a huge impact on decision-makers, and as automotive companies have traditionally relied on solid regional sales, convincing them of the merits of a non-existent global lubricant is bound to be difficult.
On the other hand, MNOs are also structured in order to handle the vast numbers of connections within their various domains, and have been understandably resistant to network switching technology that allows users to change and compare their service provider extremely easily. Because of this structure, the top MNOs around the world are focussing on the next generation of connectivity technologies with the goal of backing the most popular technology and continuing with their global proprietary dominance.
Unfortunately, there is not likely to be any single standard to satisfy the current MNO business model, and the inflexibility of MNOs to date means that vehicle manufacturers waiting to develop reliable connected products have to wait for the operators to realize that an open and diverse market spells good news for everyone.
Stuck in the Middle Without eU
What eUICC technology means for both of these restricted sectors is a return to their glory days – with a much-needed update. According to a report by PAC, 80% of new vehicles will be connected by 2020, which means that the completion of the eUICC standard will allow manufacturers to meet a growing and seemingly stable trend that asks cars to be more than just a vessel. OEMs can now develop products designed around embedded connectivity, removing bulky removable modules to make space for all the new features the market demands, and most importantly allowing manufacturers to install the eUICC compatible SIM before choosing a connectivity provider, saving billions by reducing an international multi-operator SIM inventory to just one SIM that is able to access the local rates available at the point of sale.
This feature of eUICC SIMs benefits operators as well. The fact that traditional SIM cards are assigned an operator profile when they are made means users are locked into this provider for the lifetime of the device – this model has grown to be incompatible with the rapid development of the IoT and when consumers are denied access to alternatives they feel trapped. By moving to an eUICC model, whereby operators rely on their merits to win the ‘bootstrap’ profile that the device relies on, MNOs gain the trust of their customers, and a greater market insight into what consumers require from their IoT connectivity.
This also means that MNOs can offer attractive rates to longer-term customers. Since the provider is chosen much further down the value chain (for example, at the car dealer stage), the MNO can always offer competitive local rates that fit the customer’s needs. As a result of this closeness to the end-user, MNOs can also build a longer-lasting customer relationship by providing the services and support that are valued at the local level, rather than providing a catch-all service that lacks a personal appeal, and in turn can build value-added services on top of their core business based on more relevant market insight.
Revving Up Recurring Revenue
The eUICC specification seems to satisfy this stalemate of innovation at every stage: vehicle manufacturers have something to show CEOs so they can start development on a cost-effective and future-proofed product, MNOs can build closer relationships with their customers based on merit and satisfaction not bomb-proof contracts and shed the image of corporate indifference and fierce client retention that afflicts them. With new attitudes and business models in place these sectors can collaborate on long-awaited common ground to create better products, and harvest recurring revenue from value-added services developed thanks to greater market insight.
Embracing eUICC technology will create lasting returns for MNOs, whose connectivity revenues from could reach $9bn USD in 2020 alone, an expected 5-10% of the overall revenue opportunity created by eUICC adoption. By the same token, automotive companies will be the greatest beneficiary of the eUICC behind consumer tech, saving so much on their connectivity and inventory costs that they will feasibly be able to create a new breed of vehicle that is a reliable roaming internet hotspot in itself, a communal and fully integrated super-transport for navigating Smart Cities, and as a social space in itself where “you will be able to sleep, read or do anything else enroute to your destination.”
Flexible Connectivity for Fast (not Furious) Consumers
This move to a more open, collaborative, and service-focused market is good news for the consumer, who will finally have access to an intelligent servant-car that can be programmed to drive itself to the bar every Friday, while streaming Stranger Things Season 5 to you and your friends in the passenger seats and keeping you all online. An added benefit for end-users is that the back-up profiles included on eUICC SIMs allow them to maintain connection across network boundaries, even if the bar you are all heading to is in another country. When a Multi-IMSI profile is added as the first ‘bootstrap’ profile on the card, users will also be able to instantly switch within the same profile, removing any downtime that could occur while switching between separate operator profiles.
This maximized resilience is becoming an essential part of the growing IoT ecosystem, satisfying the demand for fast, reliable, and more relevant products and services. The wave of competition, cross-sector collaboration, and more flexible and dynamic business models brought about by these changing demands, will finally allow connected cars to gain the traction they need to bring about the IoT transport revolution.