27 May 2021
Reading Time: 4 mins
27 May 2021
Reading Time: 4 mins
While we now arguably live in the era of ubicomp (ubiquitous computing) thanks to smartphones and data connectivity provided by MNOs (mobile network operators), ubicomp’s machine-focused sibling, IoT, remains at a relatively nascent stage. The truth is that communication efforts and computing advances, especially on the mobile network side, have heavily focused on delivering new and improved experiences for human-to-human communication. The ubicomp era arrived roughly around 2010; given that the term was coined roughly a decade earlier than IoT, is it safe to assume that the IoT era is now ready for lift-off?
Today, we find ourselves inside a perfect storm to catalyse IoT growth. The COVID-19 pandemic has highlighted the importance of remote monitoring, automation, connectivity, and digitisation during times when business is no longer ‘business as usual’. Hardware costs have continually fallen over the years, while cloud computing offers powerful analytics capabilities anytime, anywhere.
Connectivity remains a challenge. IoT customers above all need reliability for their investments. This means near-100% coverage alongside an ecosystem that meets their requirements in terms of application performance, power consumption, cost and flexibility. In this blog, we’ll investigate what this all means, and why eSIM localisation is a critical enabler of this.
Traditional cellular IoT has been enabled by roaming. This is because when devices are produced, it is often unknown at the outset where they will operate in the world. Roaming SIMs have offered a solution to this problem by simplifying deployments: large MNOs can provide customers with good (~80%) global coverage through bilateral roaming agreements and broad roaming alliance partnerships. Theoretically, the IoT customer can establish a connectivity contract with an operator and deploy its devices anywhere in the world.
Unfortunately, this model is not as reliable as IoT customers require. The SIM is tied to the contracted operator, which means that coverage and costs are not always optimal. Meanwhile, if the operator’s roaming agreements run into any trouble, the customer has significant cost implications to ensure that devices remain online.
eSIM localisation provides a superior solution to this conundrum. In the first instance, eSIM decouples the SIM from the operator: network providers can be switched remotely, offering an unparalleled level of flexibility in terms of connectivity. Even more importantly, this flexible framework allows customers to avoid the roaming model altogether by downloading and activating a local operator’s connectivity profile.
To understand why eSIM localisation is so important, we’ll need to look at some of its benefits and why it offers the reliability that IoT customers need for their projects.
eSIM requires more upfront investment than traditional SIM solutions. This is because the hardware is more expensive, and providers’ capital investments into eUICC (the eSIM over-the-air software systems) must be recouped to support the ecosystem. Nevertheless, IoT projects are long-term investments: devices are often in the field for a decade or more. At this point, TCO (Total Cost of Ownership) becomes a critical metric. As mentioned earlier, traditional roaming SIMs carry an element of risk with them. If network coverage is poor, or devices land in countries outside of an operator’s main roaming footprint, or even if operators cancel or change roaming agreements, customer costs can quickly spiral out of control. By localising the SIM card with eSIM, these risks and unforeseen costs can be avoided, lowering the overall TCO.
Around the world, telecoms regulators and MNOs are becoming increasingly concerned with the prospect of permanent IoT roaming: when IoT devices roam on a foreign network for longer than 90 consecutive days. Typical concerns include cross-border migration of data, network performance, and capacity issues in addition to price pressure on the wholesale market. Typically, an operator can achieve five times more revenue by selling connectivity at retail rather than wholesale rates, and initiatives such as ‘roam like at home,’ wholesale price cap introductions in addition to intense competition on the market mean that these rates will only trend further down into the medium-term.
eSIM localisation means that permanent roaming is no longer an issue. Connectivity and data processing can be serviced locally, avoiding regulatory concerns, while offering operators a more competitive play on the IoT market.
One aspect that is often overlooked in roaming is the issue of performance. Traditional roaming normally employs a ‘home-routed’ architecture, where data travels from the visited operator to the home operator and then back to the visited operator. From an MNO standpoint, home routing is relatively simple to implement from a billing perspective and is thus pervasive in the industry. However, additional costs are incurred in transporting the data due to the traffic routing model, while customer latency is impacted, reducing application performance. This makes roaming unsuitable for latency-sensitive use cases.
Importantly, IoT is heavily focused towards power efficiency. Many devices are battery-operated, and cannot afford the additional power demands imposed by roaming steering technology, which might force roaming connections onto networks that offer lower costs for MNOs (thanks to discount agreements) without regard to signal quality. Meanwhile, devices using Low Power Wide Area Network (LPWAN) technologies such as NB-IoT and LTE-M rely on power-saving features built into the standard such as Power Saving Mode (PSM) and Extended Discontinuous Reception (eDRX). PSM and eDRX are very rarely enabled by operators in roaming scenarios, resulting in dramatic battery life reductions.
eSIM localisation avoids home-routed roaming architectures while also allowing LPWAN devices to access the full suite of power-saving features. Customers can thus enjoy improved application performance in addition to longer lifecycles for power-constrained devices.
Steffen is an experienced Research Analyst specialising in IoT, Fintech and AI. Author of over 25 market research reports, and frequent lead contributor to bespoke consultancy projects for major clients.