The US Department of Justice has given preliminary approval to a plan for the wireless industry to review the eSIM standards, and states that new safeguards should prevent carriers from conspiring with competitors in the process of setting standards. But the DOJ has warned the industry that these anti-competitive provisions should be eliminated from the current eSIM standard or faced with possible enforcement of antitrust laws.
The DOJ started researching AT&T, Verizon and the GSMA, a trading group that represents mobile providers worldwide, last year. The antitrust enforcers found that established operators stacked the deck over competitors while developing an industry standard for eSIM, the built-in SIM technology that is used instead of removable SIM cards in new smartphones and other devices.
In theory, the eSIM technology should make it easier to switch providers or use multiple providers, since the technology does not require exchanges between physical SIM cards. But how it works in practice depends strongly on whether large airlines dominate the standardization process.
The DOJ study found that “the GSMA and its members of the mobile network operator used an unbalanced standard setting process, with procedures that stacked the deck to their advantage, to include an RSP (Remote SIM Provisioning) specification that contained provisions competition between networks, “the agency said last week.
That defective process resulted in RSPv2, making it easy for a carrier to lock eSIM-equipped smartphones on its network, according to the DOJ. The standard has so-called “profile policies” that require smartphones to include “the operator-controlled lock option to be considered compatible with the RSP specification,” the DOJ said. These provisions “can limit the pro-competitive potential of eSIMs without being necessary to reach remote facilities or to resolve an interoperability problem,” the DOJ said.
The current standard also contains provisions that make it more difficult for telephones to switch between networks automatically when the telephone “detects stronger network coverage or a cheaper network,” according to the DOJ. The standard “also prevents an eSIM from actively using profiles from multiple providers at the same time.”
DOJ will watch and wait
In spite of that, the DOJ said it would not launch an antitrust lawsuit. That’s because the GSMA has agreed to a new standard setting process that has taken away DOJ’s concerns and will use that process to develop a new standard that will replace RSPv2. The DOJ said to be satisfied with the process changes of the GSMA, but that it will follow the implementation of the new standard and take action if the GSMA does not remove the anti-competitive provisions in the next version of RSP.
The GSMA described its new process – called AA.35 – in a letter to the DOJ in July, and DOJ antitrust chief Makan Delrahim gave an update on the “current enforcement intentions of the agency regarding the GSMA proposal” in a letter to the GSMA last week. The DOJ said it is “not currently planning to challenge AA.35 if it comes into effect” because the new process “provides sufficient protection to minimize the chances of anti-competitive self-handling within the GSMA if applied as envisaged. “.
However, the DOJ said it will “closely monitor how AA.35 is applied and whether it succeeds in promoting interoperability.” The DOJ also warned the GSMA that if airlines conclude separate agreements to restrict competition, “such agreements are always subject to independent antitrust investigation.”
What the industry has agreed to
Originally, the GSMA allowed non-providers such as smartphone manufacturers to participate in the standard development process, but ensured that all final decisions were managed by mobile providers. The DOJ said it was “concerned that the operator-dominated process of the GSMA was used with the purpose and effect of modifying what would otherwise have been competitive negotiations between operators and smartphone manufacturers (” OEMs “) on the design and the implementation of eSIMs. “
But after the DOJ started investigating, the GSMA introduced the alternative AA.35 process. As the DOJ noted, “AA.35 creates a two-stage process, with an Industry Specification Issuing Group (” ISIG “) creating the standards and an Industry Specification Approving Group (” ISAG “) approving the standards.”
ISIG membership is “open to all members, and ensures that there are no operator-exclusive committees to direct the process,” the DOJ continued. Non-carriers can become members of the ISAG, which “eliminates the full control that operators previously had and instead allows all parts of the industry to be represented,” the DOJ said.
Another security feature prevents standards from being approved without the permission of smartphone manufacturers. “At ISAG level (AA.35) requires approval of standards by individual majorities of ISAG operator and non-operator members,” the DOJ said. “Both bodies require a negative vote statement, another improvement that increases transparency and indicates meaningful attempts to reach consensus.”
Another new provision makes it possible to have appeals heard by an independent panel. Finally, operators cannot bypass or change this process “without the support of non-operator members,” as the voting structure requires the consent of both groups, according to the DOJ.
Abolition of anti-competitive provisions
The current version of the eSIM standard, which was approved according to the old, defective process, has “several important functions that have limited the disruptive potential of eSIMs so far,” the DOJ said. That is a reference to the phone lock described earlier in this article and “provisions that limit the number of active profiles on an eSIM or impede the ability of the user to agree with dynamic profile switching,” the DOJ said.
For example, RSPv2 requires consumers to give their approval whenever an eSIM “switches between profiles or networks,” preventing the scenario where a phone automatically switches between networks “if it detects stronger network coverage or a cheaper network,” the DOJ said.
An RSPv2 ban on simultaneous use of profiles from multiple providers could prevent scenarios in which users split their phone into work-related and personal profiles or multiple “profiles optimized for different coverage areas or for international travel,” according to the DOJ. The established airlines apparently wanted that restriction to “allow a potential threat to competition that would allow a user to share usage among operators,” the DOJ said.
When the GSMA uses its new AA.35 process to create a new standard, the DOJ said it expects the group to reconsider those anti-competitive rules.
“The ministry will pay special attention to whether RSPv3 contains provisions that are only justified by the interest of incumbents to gain a competitive advantage or to suppress new sources of competition,” Delrahim warned the GSMA. The DOJ “reserves the right to initiate enforcement action in the future” if the GSMA’s implementation of AA.35 “appears to have an anti-competitive goal or effect,” he wrote.
