France Telecom CEO: Carriers Oppose Apple’s Integrated SIM

The mobile space is all about a tug-of-war of control between network operators, device manufacturers and software developers. But rarely do the players involved make that so obvious as France Telecom CEO Stephane Richard did during a recent interview with AllThingsD’s Ina Fried. Richard specifically referenced the quiet battle for control being waged between carriers like Orange, which is owned by France Telecom, and Apple (s aapl), whose iPhone leads the pack in smartphone hardware.
Richard articulated anxieties regarding two areas where Apple either already has or could potentially wrest more control away from carriers. The first is with the Apple App Store, which now offers a library 500,000 apps. Apple has exclusive control over what software is allowed on Apple devices, independent of carriers. Richard framed this as a net neutrality issue, since it means Apple has the exclusive power to censor content it finds disagreeable.
It’s already a weak argument, because there’s plenty of choice available to customers who don’t want to deal with Apple’s closed ecosystem, but it’s worth remembering that carriers like Orange once operated as the exclusive channel through which additional software could be added to any phone, and the loss of that relationship with the customer is a costly one. In fact, Richard suggested the main problem carriers have with the App Store is that Apple is well within its rights to reject carrier software from the marketplace. Being cut out of the software loop altogether isn’t an attractive prospect to network operators, since it leads to Apple grabbing control of subscriber billing info and the relationship with those customers, as well loss of revenue stemming from software sales.
Apple apparently wanted to hold even more control over the customer using a software-only virtual SIM, according to Richard. Dubbed the “e-SIM project,” Richard said Apple had been working on a way to allow phones to work without hardware SIM cards, which would clear up a significant amount of internal space, and likely make it easier for customers to switch carriers. Network operators advised Apple that this was “a bad idea because the SIM card is a critical piece of the security and authentication process,” said Richard, arguing that “it would be very difficult for a telco or carrier to manage the customer relationship” if an e-SIM was implemented.
Which, of course, is a roundabout way of saying carriers didn’t want to be left behind while Apple took a more direct role in managing cellular customers. As a compromise, Richard says Orange and others are working with Apple to standardize a new, smaller SIM card design. Richard doesn’t go so far as to claim that the e-SIM project is off the table completely, but it seems apparent that it’s not something major network operators want to see in production iPhones anytime soon.