Almost A Third Of U.S. Households Have Cut The Landline Cord

Almost 30 percent of U.S. households have cut the cord, up from about 25 percent a year ago, says Citi Investment Research analyst Jason Bazinet.

Over the past nine quarters, wireless substitution has accelerated, with more than one percent of households cutting the cord every quarter, or five percent a year, Bazinet says.

Almost A Third Of U.S. Households Have Cut The Landline Cord

Arab Phone Lines Continue Decline

Lower use of fixed voice lines is not a phenomenon limited to North America, Western Europe or Japan, it appears.

Surveying 20 fixed network operators in 15 Arab countries, the Arab Advisors Group finds 27.8 million fixed line subscriptions in use at the end of September 2009, down from 29.2 million at year end 2008, a drop of 4.6 percent.

Globally, wireless stands at 67 percent penetration, according to the International Telecommunications Union, compared to 18 percent fixed voice line penetration.

That means there are about four mobile accounts in service for every fixed line. In the broadband access area, there already is 9.5 percent penetration of mobile broadband, globally, compared to 7 percent penetration of fixed broadband access, the ITU says.

Any way one looks at the matter, it increasingly is a wireless world.

Verizon Says Average LTE Speeds Will be 5 Mbps to 12 Mbps, Peak of 40 Mbps to 50 Mbps

Verizon Wireless says its 4G Long Term Evolution network field trials in Boston and Seattle indicate the network is capable of peak download speeds of 40 to 50 megabits per second and peak upload speeds of 20 to 25 Mbps, with average data rates of 5 Mbps to 12 Mbps on the downlink and 2 Mbps to 5 Mbps on the uplink in real-world environments.

Verizon says it will have the new network up and running in 25 to 30 markets by the end of 2010 and will reach about 100 million people.

Aside from the speed advantages, what might be important for many users is better indoor reception. The new LTE network will operate in the 700-MHz frequencies, which means signals will penetrate building walls far better than signals now used in the 2-GHz range.

You can make your own decisions about whether the higher speeds make wireless a reasonable substitute for fixed connections. If a user downloads a lot of video, the answer likely is "no." But if a user is a lighter user, LTE might well be a workable solution for at least some percentage of users.

We have seen what mobility has done to demand for fixed voice connections. We should soon see whether the same thing happens in the broadband access arena.

Over the Next 6 Months, 3 Million More U.S. Households Will go "Wireless Only"

At current rates, over the next six months about three million more U.S. homes will go "wireless only" for phone service, a new study by the Centers for Disease Control suggests.

About 22.7 percent of U.S. homes apparently had wireless-only phone service in June 2009, according to a preliminary analysis of the most-recent survey by the Centers for Disease Control, up from about 20 percent in December of 2008.

In addition, nearly 15 percent of surveyed homes had a landline yet received all or almost all calls on wireless telephones.

A "family" can be an individual or a group of two or more related persons living together in the same housing unit (a "household"). Thus, a family can consist of only one person, and more than one family can live in a household (including, for example, a household where there are multiple single-person families, as when unrelated roommates are living together).

Approximately 21 percent of all adults--approximately 48 million people--live in households with only wireless telephones.

The percentage of households that are wireless-only has been steadily increasing, and the 2.5-percentage-point increase from 2008 through the first six months of 2009 is about equal to the 2.7-percentage-point increase observed from the first six months of 2008 through the last six months of 2008.

The percentage of households that are wireless-only increased by about five percentage points in just 12 months, from 17.5 percent in the first six months of 2008 to 22.7 percent in the first six months of 2009.

There are about 113 million U.S. homes with fixed telephone lines, and about 118 million U.S. dwellings, according to the Federal Communications Commission. A five-percent increase in homes using wireless only would amount to about six million homes.

Should that rate of shift continue, one would expect a further attrition of about three million homes to the wireless-only category over the next six months.

A large majority of households using wireless-only communications (68.5 percent) were in households lived in by unrelated adult roommates. Think college students and younger workers early in their careers and you get the picture.

Likewise, 41 percent of adults renting their homes had only wireless telephones. About 13 percent of adults owning their home are wireless only, the CDC says.

Nearly half of adults aged 25 years to 29 years (45.8 percent) lived in households with only wireless telephones, the study suggests.

More than a third of adults aged 18 to 24 (37.6 percent) and approximately a third of adults aged 30 to 34 (33.5 percent) lived in wireless-only households.

Some 21.5 percent of adults aged 35 to 44 were wireless only; 12.8 percent of adults 45 to 64; and 5.4 percent of those 65 and over. However, the percentage of wireless-only adults within each age group has increased over time, the CDC says.

Among all wireless-only adults, the proportion of adults aged 30 years and over has steadily increased. In the first 6 months of 2009, the majority of wireless-only adults (57.2 percent) were aged 30 and over, up from 48.4 percent three years earlier.

Adults working at a job or business (19.5 percent) and adults going to school (21.1 percent) were more likely to be living in wireless-mostly households than were adults keeping house (12.7 percent) or with another employment status such as retired or unemployed (nine percent).

Adults with college degrees (19.7 percent) were more likely to be living in wireless-mostly households than were high school graduates (13.7 percent) or adults with less education (12.1 percent).

You might suspect that households with children are less likely to be wireless only, but that seems not to be the case. In the CDC survey, adults living with children (20.5 percent) were more likely than adults living alone (10 percent) or with only adult relatives (14.7 percent) to be living in wireless-mostly households.

You might suspect that more users are wireless only in urban area, and that seems to be the case. Adults living in metropolitan areas (16.9 percent) were more likely to be living in wireless-mostly households than were adults living in more rural areas (13.5 percent).

ITU Issues Views on Recession Impact on Telecom

At a high level, nobody is completely sure consumer behavior in this recession will match behavior in past recessions, for any number of painfully obvious reasons. There also is some thinking that as broadband had not attained mass adoption status during the last recession, this will be the first test of demand elasticity for fixed broadband.

And nobody seems to believe that wireline voice will in any way be helped. There is probably less consensus on what will happen in the wireless business, but wireless service providers likely are among the best-placed industry segments during the recession, in part because of greater "flexibility in their cost structure and capex and fixed-mobile substitution," a new report by the International Telecommunications Union says.

And though broadband access demand is believed to be relatively inelastic, that almost certainly will not be the case for fixed voice.

"Telecom services are likely to come under further price pressure, as operators will fight for a more cost-focused customer, resulting in further erosion of margins," the ITU suggests. And that is going to favor mobile operators as well.

"The more flexible cost structure of mobile networks means that mobile operators are winning more of the lower usage end of the fixed services customer base," the ITU says. "This has happened in voice, and 2008 has demonstrated that mobile broadband can substitute for light-usage DSL."

For countries where data services are popular, data revenues could be adversely impacted by a reduction in consumers’ real incomes, ITU says. Also, more consumers are likely to opt for prepaid and flat-rate packages for telecom services to try and control their expenditure.

Unemployment may accelerate fixed-mobile substitution, with consumers preferring to switch
fully to mobile services. Young people may delay decisions to adopt a fixed broadband or voice line in addition to mobile service.

Unemployment will accelerate households’ decisions to give up fixed services, either because they are unaffordable, or because a mobile alternative is cheaper.

"In terms of practical pricing strategy, the economic slowdown will increase pressure on operators to reduce prices," the ITU says. Operators will find it harder to promote value-added services and the adoption of new services such as mobile TV will be affected, ITU believes.

Belgian Mobile Operator Wants to Kill Fixed Line

Belgian mobile operator Mobistar is intensifying its efforts to take market share from landline provider Belgacom by aggressively targeting its larger rival's fixed line subscribers. The Mobistar AtHome product allows users 40 hours of mobile calls from the home for 10 Euros a month.

About 35 percent of Belgian households no longer possess a fixed line telephone and another 28 percent are prepared to give theirs up if there is a good alternative, some researchers have found.

Wireless Overtakes Wireline This Summer

Mobile voice volume will overtake fixed in Western Europe by mid-year, researchers at Analysys now predict. The proportion of call minutes made from mobiles has increased by 1.4 percentage points each quarter over the last year.

In the United Kingdom, where patterns of consumption are close to the European average, mobile voice usage should overtake fixed voice in the second quarter of 2008.

In France, mobile voice usage has already surpassed that of fixed voice, and keeps growing despite the widespread availability of practically free voice over broadband.

On the other hand, mobile voice is not expected to overtake fixed voice in the Italian market until the first quarter of 2009. The German market will not experience this phenomenon for about two years.

Portugal, having the lowest voice consumption in Western Europe, was the first country in which mobile overtook fixed, while Sweden, which has one of the highest, will be among the last to change, Analysys researchers say.

For mobile providers, price is the trick. Once wireless calling costs are low enough, users seem well able to act on the relative value-price perceptions wired voice and wireless represent. In many cases, those users show a strong preference for mobility.

Wireless Substitution: in China

China Telecom, the nation's largest fixed line company, reported a decline of 2.7 million local access lines in 2007, as a result of great competition from wireless carriers. The number of fixed line subscriptions fell by 1.48 million in December, its fifth consecutive monthly loss, to takes China Telecom’s total to 220.3 million.

China Mobile added 68.1 million users in 2007 to take its total to 369.3 million, while Unicom added 18 million subscribers to reach 160.3 million subs.

Fixed line substitution isn't just a problem occurring in North America and Europe, apparently.

Mobile Web: Falling Walls

The Internet has proven problematic for communications providers in any number of ways. Aside from mobility, the Internet and private IP services provide the foundation for most growth initiatives. Without it, there would be no demand for broadband access services, music downloads, video downloads and streaming, videoconferencing or Web services.

On the other hand, IP-based services also allow creation of services outside the traditional service provider walled gardens, creating competition for captive provider services. As a rule, IP also lowers the cost, and therefore the retail price, of just about any communications, content or information service.

So it is no surprise that wireless providers have mixed feelings about wider use of mobile instant messaging services that compete, at least in part, with lucrative text messaging services.

By the end of 2013, as many as 24 percent of mobile consumers will be using mobile IM services, say researchers at Forrester Research. That likely will cannibalize some amount of text messaging and shift brand awareness towards the IM providers (Microsoft, Google, Yahoo, AOL) rather than mobile carriers.

Less Focus on Landlines?

Once upon a time, telecom analysts tracked the volume of a carrier's access lines in service, applied a revenue per line metric, and got pretty close to that carrier's annual revenue. No longer.

Given the mutltiple lines of business and products, if anything gets tracked as a more accurate predicator of how a carrier is doing, it is revenue-generating units.

Keep in mind that most tier one "telco" service providers get something on the order of 20 percent of revenue from consumer landlines these days. To be be sure, lines still are important cash flow generators, but no longer are driving growth.

That honor is reserved for mobile and broadband products. Businesses are a different matter, but for consumers, most of whom are equipped with wireless phones in any case, there just are more questions every day about why to keep a wireline circuit.

Some analysts predict that, by 2010 (two more years) wireless-only households should rise to 27 percent, from at least 13 percent in 2007, according to the Pew Internet & American Life Project. Other analysts think the figures already are higher, in the 17 percent range.

Mobiles Displacing Landlines in Africa

Mobility increasingly is the way human beings talk, though in many cases the use of Subscriber Information Management (SIM) cards might outpace the propagation of devices.

The substitution of cell phones for landlines is increasing across Morocco, Algeria, Sudan and Tunisia, for example.

In Mauritania, the number of SIM cards per landline was 29 in 2006, compared to 14.7 in 2005, which is the highest rate among the seven countries of Algeria, Egypt, Libya, Mauritania, Morocco, Sudan and Tunisia.

In 2006, Egypt and Libya counted the lowest ratio of SIM cards versus number of
landlines, respectively, at 1.7 and 4.9. In Libya, 2006 marked the year whereby SIM card numbers topped landlines.

Wireless Spending Now Equals Wireline

U.S. consumer household spending on wireless now equals spending on wired voice services, the Bureau of Labor Statistics Consumer Expenditure Survey shows. Homes with multiple teenagers and two working parents probably will argue that wireless spending now vastly outpaces wireline, as landlines are phones connecting "places," while mobile connect people. There being more "people" than "places" in such a household, it is easy to see that wireless is the dominant spending category.

Cellular phone expenditures increased rapidly from 2001 through 2006. Coupled with a decrease in spending on residential landline phone services (residential phone services) over the same period, spending on the two types of services were practically equal in 2006.

Expenditures for cellular phone services per consumer unit rose from $210 in 2001 to $524 in 2006, an increase of 149 percent. Expenditures for residential phone services per consumer unit fell from $686 in 2001 to $542 in 2006, a decline of 21 percent.

In 2001, the ratio of spending on residential phone services to spending on cellular phone services was greater than 3 to 1. In 2006, the shares of these two components were almost equal, with residential phone expenditures accounting for 49.9 percent of total telephone expenditures and cellular phone expenditures constituting 48.2 percent.

13.6 Percent of U.S. Homes are Wireless Only

Preliminary results from the January–June 2007 National Health Interview Survey (NHIS) indicate that more than one out of every eight American homes (13.6 percent) had only wireless telephones during the first half of 2007.

In the first six months of 2007, 13.6 percent of households did not have a traditional landline telephone, but did have at least one wireless telephone. Approximately 12.6 percent of all adults—28 million—lived in households with only wireless telephones; 11.9 percent of all children—nearly 9 million children—lived in households with only wireless telephones.

The percentage of adults living in wireless-only households has been steadily increasing since 2003, CDC finds. During the first six months of 2007, one out of every eight adults lived in wireless-only households. One year before, one out of every 10 adults lived in wireless-only households. And two years before that, in 2004, only one out of every 20 adults lived in wireless-only households.

The observed increase in the percentage of adults living in wireless-only households from the last six months of 2006 to the first 6 months of 2007 was not statistically significant.

But other observed increases over time in the percentage of adults living in wireless-only households were statistically significant, CDC finds. These results suggest a possible recent decline in the rate of increase.

The percentage of adults and the percentage of children living without any telephone service have remained relatively unchanged over the past three years. Approximately 1.9 percent of households had no telephone service. Approximately 3.5 million adults (1.6 percent) and more than one million children (1.7 percent) lived in these households.

For the period January through June 2007, the results reveal that more than one-half of all adults living with unrelated roommates (55.3 percent) lived in households with only wireless telephones.

Adults renting their home (28.2 percent) were more likely than adults owning their home (6.7 percent) to be living in households with only wireless telephones.

More than one in four adults aged 18-24 years (27.9 percent) lived in households with only wireless telephones. Nearly 31 percent of adults aged 25-29 years lived in households with only wireless telephones. As age increased, the percentage of adults living in households with only wireless telephones decreased. Wireless-only percentages were 12.6 percent for adults aged 30-44 years; 7.1 percent for adults aged 45-64 years; and two percent for adults aged 65 years or over.

Men (13.8 percent) were more likely than women (11.5 percent) to be living in households with only wireless telephones. Adults living in poverty (21.6 percent) were more likely than higher income adults to be living in households with only wireless telephones. Adults living in the South (14.9 percent) and Midwest (14 percent) were more likely than adults living in the Northeast (8.8 percent) to be living in households with only wireless telephones.

Non-Hispanic white adults (11.3 percent) and non-Hispanic black adults (14.3 percent) were less likely than Hispanic adults (18 percent) to be living in households with only wireless telephones.