Embedded SIM could cause carrier conflict for Apple

Apple is rumored to be considering an embedded, programmable SIM module for future iPhone models. Some carriers are reportedly unhappy with the move, however, since it would put more control over choosing service providers in the hands of Apple and consumers. These carriers are now said to be warning Apple that they will drop the large subsidies they provide when customers sign a service contract, which could lead to a significant drop in iPhone sales.

Apple has supposedly been working with SIM manufacturer Gemalto to create a programmable SIM module that can be embedded and sealed inside an iPhone. The module would have a small bit of flash storage that can be updated with carrier-specific information, making it easy to activate the device remotely. With such a module, Apple could easily activate an iPhone for any available carrier either in a store or via the Web.

Some European carriers are concerned that a programmable SIM would undermine their relationship with their customers and give Apple too much control over the activation process. Furthermore, it could make it easier for users to switch carriers or push for shorter-term contracts. The programmable SIM could eventually lead to mobile carriers' worst nightmare—simply serving as dumb pipes for voice and data. (That doesn't sound too bad for consumers.)

Sources within these European carriers told Financial Times that Apple is risking a "war" that could result in carriers refusing to offer subsidies—often as high as $400 to $500—when customers buy a new iPhone. Without those subsidies, iPhone sales could be significantly hampered—one Bernstein analyst told FT that it could be as much as 12 percent, though we suspect that in some markets (such as the US) it could be more.

The carriers may have more than Apple and the iPhone to worry about, though. The GSM Association, which helps define the standards used for mobile communications, announced Thursday that it was forming a task force to develop a standardized programmable SIM module expected to be used in devices launching in 2012.