Further Considerations – LTE, UICC and the Future of the U.S. Mobile Telecommunications Industry

In the US, some consumers choose
operators based on their devices rather
than on their services.

In the United States, phones like the iPhone, the BlackBerry Storm, the Android and the Palm Pre are closely associated with the operators AT&T, Verizon Wireless, T-Mobile and Sprint, respectively. This is because of phone exclusivity and phone subsidies. Those operators are the only operators authorized to sell those handsets.

For consumers, this is a hindrance to choice. In order for consumers to get the phone they want, they need to sign a contract with the associated operator for a year or more. The consumer gets a subsidy on the cost of the handset. This is how it has always worked in the United States. Some consumers choose operators based on their devices rather than on their services. New devices for M2M and netbooks are already showing the limitations of the current model where device subsidies limit the availability of devices on all networks.

In June, The United States Federal Communications Commission (FCC) said it will explore the issue of phone exclusivity, and a congressional committee held hearings on it.

"Today, when you sit down at a computer and you access a broadband connection, you're not told by your broadband provider that you have to have a Dell or an HP or an Apple in order to access the network," stated Sen. John Kerry (D - Mass.), at the June hearing. "And when you purchase a wireless phone in Asia or Europe, you typically don't buy it through a wireless carrier. You purchase it separately from the manufacturer or from an outlet."

As operators evolve to LTE, they could also evolve to a more open U.S. wireless telecommunications industry using the UICC. In an industry like this, consumers can choose any phone they want and use any network. Choices will be based on individual criteria. This type of model would follow the intentions of LTE - to give consumers more freedom.

Operators can still subsidize phone costs for subscribers. The solution is to attach the subsidies to the subscriptions, not the handsets. So, consumers can buy an "unlocked" phone of their choice and then pick the operator of their choice; when they sign the operator contract, they receive the subsidy for the cost of the device. Then the subscriber inserts the UICC issued by the operator, and is ready to use the new device.

Handset manufacturers and operators both benefit from this model, too. Instead of spending a lot of time customizing devices for operators, handset manufacturers can spend their time developing more innovative smartphones, faster. Operators can use the UICC in the devices to protect their billing, introduce new services, and build loyalty. The UICC puts the brand of the operator in the hands of the subscribers that they carry wherever they go. A UICC provides portability, security, trust and a clear separation between subscription and device.

In short, LTE and the UICC can mean a dramatic shift in the United States, where operators that offer the highest quality and most innovative services on the widest array of devices will win in the end.