Is North America ready for removable user-identity cards?

There's a little card that links CDMA and GSM networks. It was introduced last year in Asia. Now that card is available in North America.

On Oct. 3, SchlumbergerSema (www.sema.com), the CDMA Development Group (CDG) (www.cdg.org) and Gemplus announced the trial of removable user-identity (R-UIM) cards in Mexico. The trial is the first step in Grupo Iusacell’s (www.iusacell.com.mx) plans to conduct full roaming interoperability trials with a GSM carrier.

However, other North American carriers haven’t rushed to adopt the cards, although vendors and CDG execs extol the cards’ virtues.

North American carriers have a wait-and-see attitude about R-UIM cards, according to Terry Yen, CDG Asia Pacific region director. Yen attributed the carriers’ hesitation to 3G migration’s consuming priorities, as well as technical issues.

“The fact that the North American carriers are doing a lot, combined with the fact that they’re dealing with some legacy networks, is why (they’re) a little bit slow to take up (R-UIM cards) right now,” Yen said. “One reason why (the SIM card) has been successful in Asia and China is because it’s being introduced on a retail level with a brand new network.”

Yen said North American carriers could benefit from R-UIM-card adoption. Besides enabling inter-standard roaming and secure transactions, he said, the R-UIM card can reduce costs.

Yen used the Hong Kong GSM market as an example of potential cost reductions. “Service providers there do not subsidize handset costs,” he said. “The reason they don’t is because the SIM card allows the service provider to separate a subscription from a phone. Say you want to buy a subscription in Hong Kong, all you need is a SIM card – that’s your service. You can go to a retail store to buy your phone. Because of that, the expectation for a service provider to subsidize a handset is gone.”

Gartner Dataquest’s R-UIM sales forecast for 2002 is a meager 2 million units. This compares to actual sales of 435 million SIM cards for the GSM market in 2000.

Andrew Phillips, Gartner Dataquest (www3.gartner.com) vice president and service director for the European semiconductor group, said he’s struggling with the forecast for R-UIM cards.

“It’s difficult to see any developing appetite for that technology,” he said.

Phillips acknowledged that CDMA carriers would like their customers to roam on GSM networks, but said carrier adoption will depend on consumer demand.

Possible markets for R-UIM cards are CDMA regions that border GSM regions and business people, who typically can afford new handsets and roaming charges, Phillips said.

On the other side of the R-UIM equation are vendors such as Gemplus and SchlumbergerSema. Both companies could use a boost in their mobile identity module businesses.

In July, Schlumberger Limited, the parent company of SchlumbergerSema, announced sales of SIM cards were down from the previous quarter. The company credited excess carrier inventories in Asia and reduced handset demand for the sales decrease.

Likewise, late last month, Gemplus announced that it anticipates reduced sales for its third quarter, as a result of soft demand for SIM cards in the GSM market.

Total glut in SIM-card inventory exceeded 50 million smart cards this year, according to Phillips.

“To Gemplus, it was very important to have a trial of the R-UIM in the Americas,” said Pura Font, Gemplus business development manager for CDMA in the Americas. “It’s very important to have a trial because that shows signs of adoption and interest from the Americas market.”

Font attributes North American carriers’ slow adoption of R-UIM cards to a lack of awareness of the cards and the benefits they offer. She also said handsets that hold R-UIM cards currently only support the 800MHz frequency.

“In the United States, you need 1900MHz, but that issue can be resolved quickly,” Font said. “All handset manufacturers are waiting for is a hint from the operators that they are ready to implement these solutions, and immediately, they would make it happen.”

Font expects North American carriers to start adopting R-UIM cards next year.

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