Ryan Keefe, the chief operating officer of SIMPL, tells Matt Hatton, the founding partner of Transforma Insights how the company is disrupting the permanent roaming market by preloading its SIM card with native operator profiles. This brings flexibility and choice with an easy-to-use management via the SIMPL platform.
Matt Hatton: At Transforma Insights we do a lot of work looking at how cellular-based IoT connectivity is delivered, including our recent Communications Service Provider IoT Peer Benchmarking report. One of the things that comes up is that there is continuing friction around both roaming and the emerging eSIM localisation. How do you see it?
Ryan Keefe: Our view is that there’s a natural friction between the emerging technologies we are working with and some of the existing permanent roaming solution providers in the space. They’ve spent a lot on capital investment in infrastructure and until now it did require heavy integration. For every carrier you want to deploy an international mobile subscriber identity (IMSI) with, you typically need a subscriber management data preparation + (SM-DP+) integration. One of the challenges with some of the existing players in the space is that domestic US mobile network operators (MNOs) are not willing to license or lease IMSIs. So, most end up with IMSIs from international carriers to roam back into the US, where there is high risk of permanent roaming. But with the evolution of the GSMA standards it’s much easier to localise and be disruptive.
The localisation that we provide is for specific carriers in the US pre-loaded at time of manufacture, and then the ability using SGP.22+, we refer to it as .22+ or 22 1/2, and with work in progress to use SGP.32, to be able to localise with activation codes rather than doing a full SM-DP+ integration.
With the SIMPL solution we can get an activation code from any MNO and download it to the SIM alongside the preloaded T-Mobile and Verizon Wireless profiles. The activation code is essentially the extracted QR code string.
What we’ve done is disruptive to the permanent roaming models. Our SIM card comes preloaded with T-Mobile and Verizon profiles and new profiles can be added with a carrier activation code. If it’s a carrier that we already contract with, then they can buy services from us. If the customer has their own carrier agreements, they can bring their own commercials and manage it in our single pane of glass, SIMPL, side-by-side.
MH: Thinking specifically about permanent roaming, what are the big problems? And specifically problems in the US.
RK: The biggest misunderstanding or unknown or maybe intentional omission from some providers is not sharing that roaming agreements between MNOs are not perpetual. Customers and solution providers will be very exposed to increased rates, capped usage, capped number of SIMs or termination of agreement between MNOs.
And one of the things that most people aren’t familiar with is QCI which stands for quality of-service class identifier. There are nine classes of SIM priority. In the US, roaming SIMs are QCI 9. For context, a conversational voice connection is typically a QCI 1 priority on the network. First responders in the US are often on QCI 6, which is still pretty high. Most of the rest, where consumer, wholesale and business sit, are QCI 6 or 7. QCI 9 is where all roaming traffic resides, this traffic has the lowest priority assuming there’s room on the network, translating into reduced reliability and high latency.
There are numerous permanent roaming customers with buyer’s remorse, citing latency and reliability issues. They’re looking to come back to domestic networks in the US, but they want to be able to use a single SIM with multiple carriers and download more if they need more. This is really impacting a lot of businesses. Customers are definitely feeling that pain in the US and Canada. That’s why we prefer the localisation and why we’ve built what we’ve built.
Another thing to consider is quality of revenue, a term more common with private equity. The economics of roaming SIMs generally look better than domestic, so naturally as you’re building out your business model and looking at recurring costs, your goal is better margins. But that’s not the whole story. I’ve personally been hired by private equity firms to perform due diligence, and increasingly they scrutinise the risks associated with the revenue derived from permanent roaming agreements.
For instance, roaming agreements between operators is best case a three-year term. But in many cases the carrier can’t and won’t tell how much time is remaining. So, you may be building a business today in security or point-of-sale where devices might be out there 5-10 years, and you have no idea how long is left on the roaming agreement upon which your connectivity provider is relying. And for someone looking to invest in that kind of company and starting to ask those questions it can be a heavy hit to your valuation. In one case I know of, it reduced the valuation by 45% because they couldn’t guarantee the SIMs would be out there in 30, 60 or 90 days after closing. It’s something else to consider in the US. And I get it, as a start-up or enterprise venturing into new connected devices, you’ll take all the margin you can get. But five years later you have a base built on roaming and PE now has this type of research on their due diligence check list.
MH: What about some horror stories? Do you have some specific examples?
RK: I don’t know if I can name names but I have many examples. While working for a mobile virtual network operator (MVNO), I was engaged in a dispute between a US and Canadian carrier where the MNVO’s costs increased 25x overnight. In another case, there was a dispute between two MNOs where the main carrier being roamed onto increased rounding up from 1KB to 100KB sessions.
I’ve also experienced a tier 1 US and a tier 1 EU MNO getting into dispute over 40,000 connections, which by today’s standards isn’t very much. The US MNO sent a cease-and-desist with 48 hours’ notice terminating SIMs that were permanently roaming. Can you imagine the pain the MVNO, and underlying customer went through? This is not an isolated incident.
As you’re no doubt aware, the tier 1 US MNOs have become much more aggressive at terminating permanent roaming agreements over the last few years as they seek to stop the revenue bleed they’re experiencing from unapproved practices. This has significant downstream effects and has resulted in more than one solution provider filing for bankruptcy
MH: Has the situation changed in the last couple of years? How does the landscape change with eSIM localisation and how do you see the network operators’ approach evolving?
RK: This is interesting. Over time you can see the pendulum swing back and forth between the carriers and the aggregators. For instance, initially the carriers would send the business towards the aggregators. Then we saw the carriers invest heavily in IoT, for instance in connectivity management platforms like Jasper, Ericsson, and Vodafone building GDSP and signing customers directly. And they reduced the commitments so anyone could sign direct. What’s been interesting with localisation is the pendulum is swinging back to aggregators. We see the MNOs wanting to partner with them for localisation. One big reason is that the carriers won’t agree to purchase orders with each other for profiles, so they need to partner. And then the aggregator can work to develop the agreements for the other operators.
And the world has changed. Back 15-20 years ago most of the solution providers had no existing base but today they do. If you’re trying to get into disrupting the space now you have to account for that. Most people don’t have an escape plan between operators. The buyers don’t want a new platform or new application programme interfaces (APIs). So, the big question is how do you manage multiple carriers with legacy and new SIMs on ‘day two’? So, we put a big emphasis on that part, creating that horizontal experience with SIMPL.
MH: That brings us on to the topic of the single pane of glass interface across multiple connectivity providers, right?
RK: Yes, that’s what I’m talking about. The eSIM evolution solves the localisation problem. But the ‘day two’ item on the list is how to manage it across all those operators. The SIMPL approach was to integrate with all the platforms, the customer can bring their own connectivity or buy from SIMPL. All with the same horizontal experience for diagnostics, alerts and automation, and cost savings dashboard enabling them to manage both old and new SIMs together and gives the industry a plan for moving on from using other carriers.
MH: Can I ask you also about online channels? This seems to be a big feature of the SIMPL approach. We see some connectivity providers shy away from online because of most customers’ requirements for customisation. But for other customers it’s exactly what they want. Is that how you see it?
RK: We identified this as a need in the market after doing a lot of research. One thing we discovered was that according to Gartner 80% of research by the next generation of buyers is online. And 44% don’t want any interaction with a salesperson at all, and for it to be completely self serve. We estimate that for 60% of new generation buyers and heavy influencers we have a silver bullet with online channels. The other 40% need more touch points, and those are usually bigger clients. We launched our B2B ecommerce platform 90 days ago and we already have people coming in and buying in a completely self-serve way. These customers can log into our B2B commerce site and have SIMs and service the same day vs. weeks or months from other providers.
MH: One trend we see is that a sophisticated online channel capability is giving customers some confidence of efficient and joined-up fulfilment. Is that how you see it too?
RK: We think it is. We have some ecosystem clients who are more hardware oriented. And we’re finding it good to push to these online channels. So, it’s not just a joined-up mechanism for us internally but also including the client processes too. I’ve been joking for years that you can Uber a helicopter faster than you can purchase SIMs. That’s the reason for us pushing the B2B commerce experience.
MH: Talk me through some of the other features that you see as being the ones that customers really value from a connectivity standpoint.
RK: In addition to the other aforementioned features, mid-cycle billing changes is a big one. It’s something the MNOs allow but the MVNOs often don’t. A few of our competitors have changed their approach because SIMPL has been offering this. We’ve even alerted customers before a billing cycle ended, giving them the chance to resolve an issue and avoid a million-dollar overage.
One key advantage we offer is helping customers identify SIM bleed or dormancy waste – an insight that some competitors only share with c-level approval. In addition, our transparency sets us apart; we openly share data on over- and under utilised pools, whether the carriers are purchased from us or ones you’ve brought yourself, along with automation tools that drive savings.
Finally, we expose a single API and SIM lifecycle experience connecting to 100 MNOs and delivering 200 built-in key performance indicators (KPIs) with interactive analytics. Customers can also buy or bring their own MNO. Interactive is the key word with our analytics experience.
MH: As another part of our research we’ve found an increasing importance for connectivity providers to also get involved with the device side of things, is that also part of your experience?
RK: We do offer full kitting and staging and fulfilment for connected things. The client buys the hardware, drop ships it to SIMPL and as orders come in, we fulfil, insert the SIM, provision, update firmware, test and handle support, return merchandise authorisations (RMAs) and even potential churn and saves when a customer calls to cancel.
MH: What message can enterprise buyers take away from our conversation?
You no longer have to be handcuffed to the risk and inflexibility of permanent roaming but can instead now benefit from the power of localisation and data transparency to improve quality and revenue.
Article by Matt Hatton, a founding partner at Transforma Insight
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