Cutting the cord - America loses its landlines

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.

Most of the time when I hear a voice that tells me to “dial 1 for English”, I have found that if I don't ever push a button, I will get a real person eventually. Once you show that you have a push button phone instead of an old dial phone, you are hooked into their system. Try it.

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?

If you have no dial tone then you have no voltage. Can't hack something that isn't there. Unless you are talking about going to a main box.

I'm indeed talking about opening the box on the outside of my house. The phone line comes off the pole and goes to that box. Inside that box is another, smaller box that says "Phone company access only". I opened it.

Put a meter across it. I bet you have no voltage. That is one of the things that pisses me off about the Phone comapany. They charge $45 to "initialize a phone line" when all they are doing is pushing a couple of buttons on a compute to activate the relay that operates your line. It basically takes about five minutes. Then they call you and ask if it's working.

If you have no service then I would bet the relay has been de-activated and you have no power to your house.

We use Skype over the computer for all phone calls.

We do have an emergency cell for emergencies. It costs $3 and 5 cents a minute. We use it about 3 or 4 times a year.

Our adult children have moved to Skype as well. I love the video cam because I can see the grandchild and they can see me. Just last night my little 2 year old grandson showed me a leggo truck that he made.

Try Skype over your computer.

We have a landline DSL for our computers but the fee is much, much less than having phone service.

By the way, we to live in a rural area and have dead zones problems with cell phones.

I put a voltmeter on the box. No current. I am not an electrician so I tried every possible combo. Still no current.

The telcos are also a source of income for the power utilities. All those telephone poles are really power poles.

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.

That was true about 10 years ago, not any longer. People are found all the time by their cell signal. As long as the phone is on they can find you even if you hang up. Of course that is both good and bad.

I put a voltmeter on the box. No current. I am not an electrician so I tried every possible combo. Still no current.

Did you have it on DC or AC? As I said, if you have no phone line then you probably have no power.

***We plug the cellphones into the car chargers. They often come with the cellphone, free. ***

That is kind of hard to do when your car is covered with about two inches of ice as we had last winter. No power for three days. We did have landline telephone.

In WWII the Berlin telephone system proved indestructible after years of aerial bombardment and later, Soviet shelling in the final siege in 1945. In the final battle combatants on both sides measured the situation by dialing phone numbers at known locations. Whoever answered, either in Russian or German, signalled the ownership of that location.

Full disclosure, I don’t own a cellphone and don’t care if I ever do. My desktop is on a DSL hookup to my landline, and I am not thus cut off from the world.

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