The SIM card. The single point of failure for the mobile industry as we know it.

After writing my post about Apple, SIMs and NFC at the weekend, I've been having a look around at some of the other material that's been published recently about all this. Rudolf van der Berg, whom I met at the Telco 2.0 event the other week, has published a great article over at GigaOm (his normal blog is here, where he has written a lot about the need for a wholesale market in mobile numbering for M2M).

I've talked before about what I term the "Tyranny of the SIM card". While SIMs are absolutely invaluable for many mobile use cases, they are absolutely awful for others. The problem is shown up the acronym itself - Subscriber Identity Module. There are plenty of situations in mobile communications for which subscriptions are utterly inappropriate as a means of customer engagement.

This is something I've talked about before - the telecom industry's myopic belief that customers can have "service in any colour they like, as long as it's a subscription". Sure, there are many circumstances for which a monthly payment makes a lot of sense - and plenty more where it doesn't, especially as we move away from the phone as the favoured device of choice.

For a telephone, fixed or mobile, a subscription is a great model, as long as licenced service providers hold a monopoly on issuing numbers. Users want to keep the same number so that they can receive incoming calls and texts, so it makes absolute sense to have an ongoing relationship with the company that controls it.

But for other devices, there is much less requirement for an ongoing contractual relationship. The hypothetical M2M-connected toaster won't be receiving inbound calls: it's likely to be an uplink-only device (eg for maintenance or whatever) or at least one which will always be initiating any connection. Same deal for a PC - which is why you don't need a single permanent identity to use WiFi.

The problem is that the SIM enables operators to count - watch the headline 5 billion number carry on to 6 billion, despite the fact that many people now have 2, 3 or 8 SIM cards. But selling SIMs is easy to do, and easy to award sales targets and bonuses for. But how do you count temporary or transactional users? Or embedded devices which send a 100-byte message once a year? Much trickier, with fewer PR-worthy numbers. How many WiFi users are there on the planet? Nobody is really sure, and in any case the figure isn't really especially useful. The mobile industry doesn't really want to shift to counting sessions, or users, or something similarly intangible - even if it makes more sense.

But the real problem is around lock-in, and the fact that the operator retains ownership of the SIM, even when inserted into a device that users own outright. From a telco viewpoint, instantiating its control in such a tangible form is hugely powerful. But from a user or third-party vendor point of view (ie Apple) that control steps across a dividing line, when used to extend the operator's domain into new areas such as data or payments. As always, where the device is subsidised, the operator has more moral authority to tell the customer how it may be used. But if an individual (say) buys a smartphone for full retail cost, then tying certain features to the SIM [eg NFC payments] could be seen as unacceptable.

Even for voice, the writing on the wall has been visible for some time, especially for roaming. Various niche operators have been playing with multi-IMSI and downloadable-IMSI SIM cards for a while, notably Truphone's Local Anywhere service for voice anti-roaming. [Disclosure: they're a client]

Then, we've had the dual-SIM, even triple-SIM phones that are popular in Asia especially. Apple has been signalling its displeasure since 2007 with the hard-to-remove card in the iPhone needing a pin inserted to extract it. The utter failure of SIM-embedded laptops to gain meaningful market traction has been unsurprising - customers have preferred cheaper & more flexible USB dongles and MiFi's.

In my view, international data roaming is the straw that has broken the SIM camel's back. We have had an array of mobile operators and industry associations attempting to defend the indefensible. When you are travelling, there is absolutely no value or justification for routing all traffic back to the home network, and paying 10x or 100x the local price of Internet connectivity. I can concede an argument for a small premium, like using your ATM card in a foreign bank's machine. But a multiple, rather than a percentage is totally egregious.

We all know it. They all know it. The European Commission knows it. Operators have been making whining excuses about prices falling (from astronomical to merely stratospheric).

Yet to mix the metaphor, it is nevertheless a golden goose, laying charge-by-the-MB eggs. Nobody has been prepared to kill it. Instead, we've had half-hearted attempts to cap wholesale prices and instigate €50 thresholds, we've seen a few isolated examples of common sense such as the proposed Spain/Portugal free-roaming idea. And we've had operators and roaming hubs pretending to do their customers a favour with special bundles, which might only be 5x ripoffs rather than 50x.

I'll remind you of my own debacle with Vodafone's completely duplicitous approach to roaming pricing.

Ultimately, for all the convenience that SIM cards bring in basic phone services, they utterly relinquish that benefit, when it is set against the iron control (almost cartel-like extortion) they allow operators to exert over data.

Unsurprisingly, some of the technology industry's finest minds have been working flat-out to find ways to subvert this control. The much-rumoured iPhone embedded SIM is an example - but there have also been signs from Google as well: remember that patent from 2 years ago, for a system in which different operators would bid to carry each call? There was some speculation about a Google SIM for the Nexus One as well.

The risk now - and I think the operators and the GSMA are also waking up to this - is that the sheer blatant effrontery around roaming (and M2M network switching) is about to result in a shift in power. Apple and others are going to find a workaround - with billions of dollars to thrown at solutions if necessary.

And if solving the data and roaming problems for SIMs also impacts the basic voice & text business models, well..... that's just collateral damage. It's not as if this has come out of the blue.

The question is whether the industry's attempts to retain centralised control with the SIM has inadvertantly resulted in the creation of a single point of failure for the mobile operator ecosystem. In trying to win the battle to protect roaming and data revenues, the operators may well have Phyrrically lost the war.

And this is all happening at a critical point:

• Android & Nokia & BlackBerry smartphones are almost cheap enough to buy without subsidy
• Apple can do its own financing for people who want iPhones
  
• Most people have alternative ID's that are better than phone numbers (Skype, Google, Facebook)
• HSPA networks are often good enough for VoIP
• Forthcoming LTE networks rely on data for VoIP
• Voice usage is stagnating anyway, in favour of various forms of messaging
• WiFi is everywhere and in all high-end devices

LTE is the killer here, to be honest. Stupidly, there is no SIM-free option for LTE data, something I've been advocating for a long time.

This means that if the operator strangehold on SIMs for data is broken by Apple or others, then they will probably lose voice on LTE as well. And you can certainly bet that any future Apple or Android voice service won't be based IMS or the I-SIM application on the UICC.

Now none of this affects the billions of ordinary mobile users, at least just yet. It will initially be confined to non-phone devices and a few top-end smartphones I expect. But I have a feeling that we're about to see the end of SIM Tyranny in one form or another.

There is a wider lesson here for the mobile industry - large pockets of profit that are based on control, rather than genuine innovation, are extremely tempting to outsiders. Almost without exception, they will be disrupted. If telcos want to retain and grow profitability, they need to invent new and valuable services and propositions continually - simply hiding ostrich-like in the sand, hoping that nobody notices areas of unrealistically high margins, is not a recipe for sustained success.