Apple has been getting lots of glamorous media for its latest models of personal technology, but mostly overlooked in all the hoopla is a breakthrough that could be far more important in practical terms. The company’s unassuming new “Apple SIM” card could allow everyone to dramatically save on cell phone costs.
A SIM card is that tiny piece of plastic in your phone that allows you to connect to a carrier’s wireless network. Typically, it’s programmed to work with one specific carrier. So, if you buy a phone on a two-year contract from AT&T, it’ll come with an AT&T SIM card inside. If you wanted to use that same phone on Verizon, you would have to buy a SIM card from Verizon and put it in that phone.
But Apple wants to change standard operating procedure. Apple’s SIM card works with multiple carriers, so you wouldn’t have to purchase an iPad or SIM card from a carrier. This isn’t like simply buying an AT&T SIM card directly from Apple instead of AT&T. With Apple’s SIM card, you can switch carriers whenever you please without having to commit to a two-year or any other term contract, or make any purchases directly through the carrier.
The Apple SIM is preinstalled on iPad Air 2 with Wi-Fi + cellular models. The card gives you the flexibility to choose from a variety of short-term plans from select carriers in this country and the UK right on your iPad. So whenever you need it, you can choose the plan that works best for you — with no long-term commitments. And when you travel, you may also be able to choose a data plan from a local carrier for the duration of your trip.
What to expect
If and when Apple rolls this SIM card out for the iPhone, however, it could mean trouble for carriers. Consumers might begin to pay the full price of a new iPhone in order to save money on data and switch between carriers that offer cheaper competing plans whenever they please. It could mean the end of roaming — and the roaming charges so profitable to the carriers.
Carriers may have to offer other perks besides cheaper prices to convince consumers they should keep buying iPhones from them instead of from Apple.
It’s even possible that one day you could turn on your iPhone, then have options for which carrier you want to use. And those carriers would compete against each other to offer you the best deal.
There is going to be a lot of resistance from carriers, and they’re unlikely to give up without a fight. But this is an interesting move from Apple that holds long-term promise for all consumers.
The high cost of roaming
Roaming charges usually hit only a small percentage of Americans — fewer than 5 percent of Americans travel abroad each year — but when they hit, they hit hard. These fees that can quickly add up to as much as $1,000.
American businesses paid as much as $693 in international roaming fees per traveler in 2008. In the years since, these costs have risen even higher. More than a third of Fortune 1000 companies, or 37 percent, spend $1,000 or more per month per user on average wireless roaming costs for their international travelers, according to a 2012 survey. A later survey of 200 mid-market companies found that they weren’t faring any better.
Overall, roaming charges are a money-making machine for carriers. In 2013, mobile roaming generated about $57 billion, according to Juniper Research. With the increase of data usage — data roaming made up about 36 percent of all global mobile roaming last year — mobile roaming is set to generate about $90 billion by 2018. International data roaming fees like those accumulated on vacation or a work trip are set to generate $42 billion in revenue.
In order to gain a competitive edge, T-Mobile announced a year ago that it was doing away with international roaming charges for its customers. According to T-Mobile CEO John Legere, margins of profit on these roaming charges can be as high as 90 percent. Meaning that for every $1 in fees, the phone company pockets 90 cents.
The EU outlaws roaming, will the U.S. follow?
It’s not just Americans whose wallets are plagued by roaming charges, either. Sick of “bill shock,” European leaders decided to do something about it and capped roaming charges in more than 40 EU countries.
After enforcing a series of reductions in voice and data roaming charges across the European Union over the last four years, the EU is ready to take the ultimate step of abolishing roaming charges entirely by late 2015.
European mobile roamers have already seen a big cut in the cost of roaming, with data charges dropping 55 percent or more compared to last year.
In at least six EU member states, consumers can choose mobile phone plans where roaming fees have been removed entirely.
Regulators are confident that roaming fees will be gone forever by Christmas 2015. They believe national governments will have to support what the overwhelming majority of Europeans want: a 100 percent end to roaming fees once and for all.
Carriers will not lose out on profits, while consumers will see no increase in prices elsewhere, regulators claimed. Cutting roaming prices will lead travelers to make more use of mobile phones when abroad, resulting in more revenue for carriers than before the roaming price caps were introduced.
Regulators also dismissed fears that the cuts would limit carrier investment in new services. Roaming is only a small part of their income and income generated through roaming, they said, has so far not been used for investments.
With the latest price cuts, data roaming prices in the EU have dropped 95 percent since 2010. Calls and text messages are also at least 20 percent cheaper.
Americans may someday save on cell phone costs in similar fashion. But it won’t take government intervention, if Apple’s new multiple carrier SIM card is allowed to get established and lives up to its potential.