Posted on 08/17/2009 1:21:30 AM PDT by Schnucki
Ever greater numbers of Americans are disconnecting their home telephones, with momentous consequences
MUCH has been made of the precipitous decline of America’s newspapers. According to one much-cited calculation, the country’s last printed newspaper will land on a doorstep sometime in the first quarter of 2043. That is a positively healthy outlook, however, compared with another staple of American life: the home telephone. Telecoms operators are seeing customers abandon landlines at a rate of 700,000 per month. Some analysts now estimate that 25% of households in America rely entirely on mobile phones (or cellphones, as Americans call them)—a share that could double within the next three years. If the decline of the landline continues at its current rate, the last cord will be cut sometime in 2025.
The impact of this trend will be greater than most people realise. It will make life increasingly difficult for telecoms firms, naturally. But it will also hurt all business that require landlines, as bills rise and business models are disrupted. No less seriously, the withering fixed-line network threatens the work of the emergency services, such as the police and fire brigade.
The decline in landline use, which has been under way for several years, has picked up speed in recent months. In the first half of 2005 only 7.3% of households were mobile-only, according to America’s Centres for Disease Control and Prevention (CDC), which collects such data because it uses landlines for health surveys. By the end of last year the proportion had reached 20.2%—increasing by 2.7 percentage points in the second half of last year alone, the biggest-ever increase (see chart).
The recession has accelerated cord-cutting, explains Stéphane Téral, an analyst at Infonetics Research, since people want to save money and are readier to sacrifice their landlines than their mobiles. But the problem is particularly acute in America because of the vastness of the country, which makes fixed-line networks expensive to run or improve. That, along with upheaval in the telecoms industry in recent years, has made internet access over landlines in America annoyingly slow, even in the cities, leaving landlines much more dispensable than they are in Europe.
All this would not matter much, were it not for the fact that many businesses depend on landlines. First to suffer are telemarketers, though they cannot expect much sympathy. Mobile numbers are harder to get hold of, and in most cases it is also against the law for telemarketers to call them (although many still do), since mobile users in America are charged for receiving calls as well as making them.
The growing ranks of people who only use mobiles are also causing trouble for polling firms. Most pollsters ignored them until early last year. But then the Pew Research Centre for the People and the Press, an outfit that studies public opinion, demonstrated that by shunning “cellphone- onlys” (CPOs), pollsters would understate Barack Obama’s margin over John McCain in the presidential election by two to three percentage points.
CPOs are twice as expensive to reach, not least because outfits like Pew offer payments to those surveyed by mobile phone to compensate for the associated call charges. Worse, pollsters do not know much about them. They are typically in their early 30s, earn less than $50,000 annually, are unmarried and move more often than the norm. But even controlling for these factors, they still had distinctive voting preferences, says Brian Schaffner, a professor at the University of Massachusetts Amherst. According to his calculations, 49% of landline respondents leant towards Mr Obama in June 2008, but the figure was 65% among CPOs. Perhaps, he speculates, CPOs are “more willing to venture into something new”.
And then there are the telecoms operators themselves. Surprisingly, the industry’s heavyweights do not seem to be too worried about losing landlines, whether to mobile operators or cable companies, which now have 20% of the landline market. Their spokesmen argue that they have seen the trend coming and have invested in new businesses. Verizon, for instance, serves nearly 20m landline customers in America’s north-east, but is also the country’s biggest mobile operator with 87.7m subscribers and is investing billions in a new fibre-optic network which reaches 2.5m homes. Verizon has sold bits of its landline businesses in three states and is negotiating to do the same elsewhere.
Nonetheless Verizon and AT&T, its main competitor, are still mostly “wireline”, says Craig Moffett, an analyst with Bernstein Research. According to his calculations, both firms’ landline businesses generate more than 50% of revenues, and an even higher share of costs. The two firms and Qwest, America’s third-biggest landline operator, have already shed thousands of jobs and announced further lay-offs to cut costs. But the accelerating loss of landlines will put increasing pressure on profit margins, argues Mr Moffett, as the high fixed cost of running the network is spread over an ever smaller number of customers. It is also likely to lead to higher bills for captive customers such as businesses with switchboards, which cannot do away with their landlines so easily.
Even if Verizon and AT&T can overcome their “wireline problem”, says Mr Moffett, it will not go away. Most telecoms operators do not have a mobile business to fall back on. Fairpoint, a firm which took over some of Verizon’s landline business, is struggling. Hawaiian Telcom filed for bankruptcy in December, not least because it was losing landline customers at a rapid clip. Such a fate raises the question of what will happen to the industry’s huge unfunded pension liabilities. Taken together, the future obligations of AT&T and Verizon are as big as those of General Motors before its recent bankruptcy.
Regulators will not just have to decide whether to subsidise or bail out landline firms. They will also have to make sure that public goods delivered via the old telephone network continue to be provided. The call-tracing software used by firefighters, ambulance services and many other “first responders” only works on landlines. And the government-imposed cross-subsidy scheme to ensure that anyone who wants a telephone line can have one is primarily geared towards landlines. As the number of lines goes down, the subsidy required to provide lines to remote locations and poor customers will have to rise.
The danger, says Mr Moffett, is that regulators will introduce new taxes on wireless and broadband services. Revenues from new services would then be used to keep an obsolete infrastructure alive—a recipe for lower growth. At that point, he says, the “wireline problem” really will be everyone’s problem.
Verizon saw this problem coming a long way off (strangely, since it *is* Verizon) and started their FIOS project both to provide added value that people would pay for at home and to reduce their costs as they had to replace their copper plant.
The current guy in charge of GM was in charge of SBC/AT&T when Verizon started their fiber charge and decided that he was going to have none of that, only roll out slow DSL, well, slowly. And maybe bundle satellite TV in. Among other stupid decisions.
AT&T is now more than a decade behind Verizon in rolling out their FIOS equivalent.
A few months back I was able to get Cable phone service, plus high speed internet, plus digital Cable, for about $45 more a month than a traditional telephone line. So now Comcast is my phone company, with my cellphone as backup for when it goes out, as it does!
We have High speed DSL and basic cable for 29 bucks/month. (comcast)
It's going to be an uphill battle retiring those Blackberries, though. :(
What happens to Fios, Cable, VoIP, and all the other wireline replacements (and their battery chargers) when the power goes off for a few hours or more?
The last time I had this problem, my power was off for two days due to a bad storm. No computer, no TV, no lights, no cable, no nothing, but my low-tech wireline phone kept working the whole time.
I wonder how DirectTV and Dish Network handle this?
You have to plug a landline phone into the back of each receiver...or at least you used to?
It was to prove that the box was at your address and not another and also to handle billing for Pay-Per-View.
We plug the cellphones into the car chargers. They often come with the cellphone, free.
Our Sat boxes aren’t plugged in anymore - I think you still need to if you are buying Pay-Per-View but I believe you can buy them on the net and don’t need to.
The first things to crash during a hurricane are electricity, cable and cell phones but phone land lines have been reliable during even the worst storms. That’s why, down here on the Space Coast, I’m keeping mine.
Cell phone service downtime statistics are considered a matter of national security and are not available to the public, not even via FOIA requests.
http://redtape.msnbc.com/2006/12/why_cell_phone_.html
Yup. That’s what makes the service unavailable to John Q. Citizen. During the 2004-05 hurricanes, power, cable and cell service was out for over a week but my land line worked fine.
I’ve said elsewhere that the telemarketers have essentially destroyed the usefulness of one of man’s greatest technological achievements.
Yes mobile phones were always the next logical step but just imagine if everyone removed the front door to their homes - this is what telemarketing has reduced us to - distrust of any caller, the ubiquity of Caller ID and a ‘conversation’ consisting of reciprocal voice mails and follow-up calls via - you guessed it - mobile phone.
Those of us who want to see government intervention minimized don’t want more telemarketing laws - the existing ones are toothless anyway (by design) and an army of chancers have long ago figured out ways to get around them. Unfortunately the free market apparently provides enough incentive for telemarketers to stay in business courtesy of enough idiots scattered across the land who actually engage in commerce with these snake oilers.
The only reason pollsters continue to rely on landline polls is money. If they are too cheap to obtain valid measurements via shoe leather then their results are therefore invalid. They can hedge their bets with margins of errors but the fact remains that anyone responding to a poll picked the phone up in the first place and agreed to share their most personal views with a complete stranger. The margin of error in any poll is probably 10% or more.
Hmmm...
Try living in a dead zone. All it takes is a hilly, rocky terrain and a bunch of NIMBYs who don’t want to see towers ANYwhere to make huge dead zones.
Still stuck with a land-line...
P.
And, if the cell towers have no power....?
I think a landline is 5 or 6 volts, which is enough to power LEDs and even recharge a cell phone, if you rig it correctly (hey, that may be the definition of irony right there).
Question: If I do not subscribe to a landline service, will the phone company know I hacked into their box and am stealing their 5 volts?
Never seen that happen, myself. We lose our power about every month, but it seems to be localized.
Unmentioned is business phone use. The telephone is not much used. E mail is the com line. I deal with many young women who don’t answer their phones. You want to communicate with them it is e mail or nothing.
When you call 911 on your land line it dosnt matter if you become unconscious or if the intruder takes away your phone. the 911 people have your address. The cell phone wont do that for you.
IMO the phone company slid downhill when they stopped having a real person you can talk to. When I dial up with a problem , I dont want a message, I dont want to push buttons, I want to speak to a real person.
That's funny. We fired our cable system (comcast) for the exact same reason. Switched to Dish network and never looked back.
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