The Department of Justice has decided not to do anything about wireless carriers’ attempts to turn eSIMs into a way to keep customers locked to their network. It doesn’t entirely rule out taking action against anticompetitive behavior in the future. But for now, the DOJ says it’s going to let the issue go because the industry group behind eSIM is going to — not actually fix the problem — change its decision-making process to be less slanted toward carriers.
eSIMs are eventually supposed to replace SIM cards, those little pieces of plastic you put in a phone to set which carrier it’s connected to. eSIMs offer a digital version of that, theoretically allowing you to switch phone carriers at the touch of a button, all through software. Your phone could even automatically switch between multiple carriers depending on which one offered a better signal, cheaper service, or specific features, if carriers and phone makers wanted to offer such a thing.
But while eSIMs have slowly been making their way into phones, basically none of that has happened. That’s because carriers — through their industry body, the GSM Association (GSMA) — have been making rules around eSIMs that allow them to lock down phones and prevent users from switching networks.
The DOJ is unusually fond of eSIM
The DOJ identified a number of rules that were added to lock a phone into one network, “without being necessary” to solve interoperability problems. North American carriers then wanted an even stronger lock-in rule so badly that, when they initially lost a vote to make it happen, they split off and voted again to pass the rule just within their own region, according to the Justice Department. Other rules prevent automatic switching between networks, preventing “new innovative service” offerings from being offered, and even stop a phone from connecting to two networks at once, as many phones already do today using two physical SIM card slots.
This all poses real competitive problems. It’s very easy right now to switch phone carriers — you just remove one SIM card and insert another. It’s also very easy to use two carriers at once if you own a phone with two SIM card slots. But with eSIMs, carriers have the ability to prevent all of this from happening, such that you’d have to get service entirely from whichever company you bought the phone from, or get them to agree to unlock your phone and hope that the software allows you to change to another carrier.
The Justice Department could have looked at this obviously problematic behavior and told the GSMA to require eSIMs to remain open to any network. It’s particularly strange that the DOJ didn’t do try to do this because it seems to have an unusual fondness for eSIMs — it continually calls them “innovative” and talks about how they can unleash “new forms of disruptive competition.” The DOJ even made full and open support for eSIM a requirement for the post-merger T-Mobile, as well as Dish, which is buying some of its divested assets.
Instead, the DOJ is doing nothing and says it’s going to keep an eye on the GSMA to see if the situation improves.
That’s because the GSMA says the problem ought to resolve itself thanks to new rules it’s imposed. Previously, GSMA standards, like the one for eSIM, were approved by carriers. Going forward, it’s created new rules that allow other companies to have a say in approval of the standards, so that they could theoretically vote down anticompetitive changes.
The eSIM standard continues to be updated and a new version is in the works. But ultimately, we don’t know if these problematic rules are going to be changed, and so the new rule-making process only goes so far toward addressing them. The DOJ says it’ll observe how the eSIM standard develops, and it could take action down the road if this behavior continues. But at least for now, it’s going to sit back and watch.