A second chance to sideline the MNOs:
However, outside the US, Apple had underestimated the continuing resilience of the cellcos, a mistake it is not making this time around. Four years ago, it quickly backed away from the embedded SIM idea, before it had even made it official, because MNOs – especially in Europe, where the scheme was expected to appear first – produced their trump card when they threatened to withdraw subsidies and prioritise other smartphones over the Apple device in their marketing.
The following year, Orange’s CEO Stephane Richard said that the mobile operators, as a group, “told [Apple] it was a bad idea because the SIM card was a critical piece of the security and authentication process. It would be very difficult for a telco or operator to manage the customer relationship. I think that they understood this point."
“Apple has long been trying to build closer and closer relationships and cut out the operators,” a senior source at a European cellco told UK newspaper The Daily Telegraph. “But this time they have been sent back to the drawing board with their tails between their legs.” Global iPhone sales could have fallen by up to 12 per cent if European operators had refused to subsidize purchases, according to analyst firm Bernstein at the time.
When it comes to handsets, most consumers are still lured by a hefty subsidy, and are unwilling to pay $500 or more upfront for a phone – and in Europe, even high end handsets are often completely "free" with sufficiently large data contracts. MNOs rage at the impact subsidies have on their profits, but they are a powerful way to lock-in customers, and only now are carriers like T-Mobile USA coming up with payments plans and other options which still retain some customer loyalty, while being less onerous than the subsidy.
Tablets are different however – less commonly subsidized and often sold with month-by-month data plans. And Apple had set some precedent when it incorporated its own microSIM in the iPad for unlocked models.