Dish could be the champion that eSIM has been looking for

Incumbent carriers probably hate eSIM because they're afraid of high churn. But, Dish would like to take advantage of churn. (Getty Images)

Dish Chairman Charlie Ergen has been referred to as a “disrupter” a lot this past week, ever since the U.S. Department of Justice struck a deal with Dish for the company to become a new wireless carrier in the United States. And, he’s wasting no time with disruptive comments.

On Dish’s recent Q2 2019 quarterly earnings call Ergen revealed that as part of the deal, both Dish and T-Mobile have to support eSIM, which stands for embedded subscriber identity module. eSIMs are similar to SIM cards, but instead of being removable, they are embedded in the mobile device. Also, they can be updated with software, as opposed to being physically replaced. With an eSIM, mobile subscribers could potentially switch service providers whenever they want, without having to obtain a new physical SIM card.

It sounds great from a consumer perspective, but carriers have dragged their feet on eSIM, presumably because it might cause them a lot of churn with subscribers coming and going constantly. They also have backend billing concerns. Subscribers might sign up and drop phone service as frequently as they currently sign up and drop their Netflix subscriptions. That kind of churn might require carriers to develop some kind of dynamic pricing model to stay ahead of the game.

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On its earnings call Ergen said, “You can imagine that we like eSIM….when you don’t have many customers, it’s easier when a customer can port their phone number and their hardware without going into a store or physically putting something in the phone. So, if you don’t have a lot of customers, that's an advantage.”

RELATED: It’s time to start getting excited about eSIM

Global Data analyst Lynnette Luna said eSIM is moving slowly partly because “carriers are not wild about it” because “they’re afraid of high churn.”

Luna, who penned a July report about eSIM, said the newest iPhones and the Pixel phones have eSIMs, while Samsung and Huawei phones do not. 

But, while eSIMs are making their way into more phones, and even though 69 operators globally have adopted eSIM technology, there’s still a hitch. Many of the earliest iPhones with eSIM capability are locked to a particular provider. So a customer with an eSIM iPhone, for instance, would probably still have to contact his current carrier to get the phone unlocked so he could switch to a different carrier, which defeats the whole purpose.

“Apple continues to play nice with carriers, as it isn’t selling the iPhone with the eSIM enabled as the primary service activation method; instead, it’s selling phones with both a physical slot and eSIM, and the physical slot is always filled by default with a SIM for whatever carrier a customer signs up with,” states the Global Data report. “The point of this eSIM incarnation, then, is to add an additional access service – for roaming, for a second line, or for rate arbitrage if the phone is unlocked. In many regions, such as the U.S., a very low number of smartphones are purchased unlocked.”

As it stands today, even though Dish and T-Mobile will be required to support eSIM, there’s no law that requires the carriers to collaborate with the phone makers to keep phones unlocked. And, there’s also the fact that the average consumer probably has no idea what an eSIM is.

Luna said for eSIM to really take off, the carriers will have to put their marketing muscle behind it.

Dish could end up being the carrier to propel eSIM. Ergen noted that the incumbents have not been supportive of eSIM, and he said, “You have to be good on customer service, and customers can switch much more easily. Look, my prediction will be that eSIM will be standard in several years in this country from all the major players, based on this deal.”

RELATED: Dish execs confident on ability to offer disruptive wireless pricing

However, as Luna said, eSIM is moving slowly, and it will probably still take “several years,” as Ergen noted.

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