If Apple's subsidiary bid is successful, it will be able to force everyone to use its proposed nano SIM standard

Inside every GSM 3G-compatible phone or device is a tiny card dubbed a "SIM" (subscriber identity module).  The chip is a hunk of plastic with a computer chip in it, carrying your subscriber information.

I. Bye-bye Micro SIM (3FF)

But traditional SIMs are big.  They're bulky.  In a game where every millimeter matters, the SIM's large form factor and the ensuing large adapter deliver a double-blow to smartphone internals space-wise.

The answer seems clearly to downsize the SIM.  That's where things get interesting.  Europe -- one of the largest GSM markets -- is currently debating whose standard to make official SIM wise.  The issue is about to come to a vote by the European Telecommunications Standards Institute (ETSI), and their decision could have a bearing on global adoption.

In one corner is Apple, Inc. (AAPL).  Apple's proposed "fourth generation form factor" (4FF) "nano SIM" is essentially a current-generation micro SIM with the surrounding plastic hacked away.  While trimming plastic seems like it would be poor fodder for a patent, Apple indicates it owns intellectual property on the trimming procedure (surprised, anyone?).  But here's the catch -- if it gets made the official standard, sources say it won't charge anyone royalties.

On the other side are a handful of competing proposals from Google Inc.'s (GOOG) new subsidiary Motorola Mobility, Nokia Oyj. (HEL:NOK1V) -- the world's largest maker of tradition phones -- and Canada's Research in Motion, Ltd. (TSE:RIM).  Their designs are more ambitious.  Similar to the microSD card, they adopt a new form factor, with smaller pins and a locking design.

SIM Card designs
Apple's design (right) is essentially a current gen. SIM card with the plastic trimmed off.  The rival designs (left) resemble a microSD card, and feature a more robust, brand new form factor.
[Image Sources: The Verge (top, bottom right; bottom left); Inventor Spot (top left)]
(Click image to enlarge.)

The trio of rivals -- one Android phonemaker (Motorola), one Windows Phone maker (Nokia), and one BB 10 phone maker (RIM) have formed an unlikely alliance to oppose Apple, given their similar designs.  Presumably, if they win they will seek some sort of combined licensing from Apple.

II. Nokia Blast Apple's Design's Technical Flaws, Apple's "Free" Rhetoric

Nokia is particularly vocal about the issue and what it views as obstructionism from Apple.  In a statement it writes:

We are not aware of any Apple Intellectual Property which it considers essential to its nano-SIM proposal. In light of this, Apple's proposal for royalty-free licensing seems no more than an attempt to devalue the intellectual property of others.

In other words, Nokia believes Apple does not own patents on its nano SIM and is merely offering its non-existent property "for free" in a bid to either get its bare-bones proposal adopted, or else force others to offer royalty-free licensing on technology they paid to develop (versus Apple's virtually free plastic-shaving approach).

SIM card
Apple's proposed "nano SIM" solution essentially just cuts away the plastic surrounding the central chip and pads.  Apple claims to have patented the approach and is looking to use its financial might to overrule a coalition of rivals. [Image Source: Free Stock Images]

Nokia also claims that Apple violates a requirement of the ETSI, which states that the new nano SIM (4FF) design must be designed in such a way that it can't be shoved in current-generation slots.  Writes the ETSI:

The design of the fourth UICC form factor shall prevent the 4FF from becoming jammed in a Mini-UICC reader. An example is that if the 4FF is turned 90 degrees and it fits perfectly into the Mini-UICC reader (4FF length = Mini-UICC width).

While Apple's design clearly violates that design paradigm and is less of an innovative leap, it does have the backing of European cell-phone carriers, in that it will be fee-free.  Further, the Apple design is reportedly more fragile.  This could work to carriers' advantage as it could force customers to keep SIM-switching to a minimum.  In fact, the Apple design is so damage-prone it would reportedly require a special protective drawer.  A source states, "Phones would need to be re-engineered with this in mind."

III. Apple's Vote Grab Would Give it a Death-Grip on EU Standards Board

Many people are disappointed that the long promised reprogrammable SIM card (something carriers are understandably opposed to) has not yet been pushed forth by any of the major players as the successor to 3FF.  That issue aside, Apple's push to peddle its SIM solution is an important one, as Apple is essentially looking to seize control of Europe's industry regulatory board.

The ETSI is supposed to be a democratic corporate construct in which every major phonemaker has a strong voice.  Apple, however, isn't interested in democracy, unless it's democracy by the dollar.  

Apple money
Apple is trying to appoint itself ruler of the ETSI board with 270 votes, thanks to its record profits.  Nokia currently has the most votes of anyone -- 92. [Image Source: SomanyMP3s]

The company is trying a rather clever ploy, reportedly registering six of its subsidiaries as voting members.  Each of these could draw as many as 45 votes, essentially multiplying Apple's voting power by six, if the effort is approved.  The Apple ploy comes thanks to a loophole in ETSI rules that states that any company with $8B in revenue can become a registered member with up to 45 votes according to the Financial Times.

The situation creates a dilemma for the ETSI, as Apple's status as the world's most profitable tech company looks to allow it to essentially annoint itself monarch of the ETSI -- unless there is a rules change to prevent multiple subsidiary registration.

Nokia currently controls 92 votes, but unlike Apple it has not tried to game the system -- nor does it likely have the capacity to.  Indeed, given the $8B USD revenue requirement, it is unclear if any other company could use Apple's unique vote-grabbing approach.  The loophole is enabled by the fact that Apple is so massively profitable that individual nation-level subsidiaries in Europe are as profitable as entire other top companies.

Nokia actively opposes Apple's vote power-grab.  The decision on membership will come down later today.

If Apple prevails, it will almost certainly not only win the passage of its standard, but also gain a virtual monopoly to dictate its will on the European Union when it comes to standards.  Needless to say, Nokia, et al. will be loathe to let that happen.

If Apple gets its way consumers may be hurt, but the company will gain a powerful bargaining chip.  After all, there is one tiny exception in the Apple "free" licensing scheme, reportedly -- licensees must offer "same terms in accordance with the principle of reciprocity".  In other words, Motorola and Samsung's would likely be forced to hand their 3G patents to Apple for free -- if they wanted to do business in Europe.

This could be just as bad for Nokia as it would be for the Android phonemakers.  After all, Nokia has fought bitter battles with Apple in court in the past.  The last thing it needs is for Apple to not only gain a key bargaining chip in the form of the SIM standard, but also to see its rival become undisputed monarch of the standards board, voting-wise.

Sources: FOSS Patents, The Verge, IDG, Financial Times

"I'd be pissed too, but you didn't have to go all Minority Report on his ass!" -- Jon Stewart on police raiding Gizmodo editor Jason Chen's home

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