Driven by pricing and convenience, a growing number of consumers are substituting wireless for wired as their primary phone service and residential long distance minutes.
Cell phones have transitioned from accessory to necessity for the portion of the population who rely on the mobile devices as their primary phone connection. In-Stat/MDR reports that a significant number of U.S. consumers have cut the cord on their landline phone, and the percentage is expected to more than double by 2008 to nearly 30 percent.
Not only have 14.4 percent cut the cord completely, another 26.4 percent would consider replacing their landline with a wireless phone if they were enticed by better prices, improved network coverage, better quality service, and enhanced mobile functionality. Additionally, the FCC's Wireless Local Number Portability (WLNP) mandate allows customers the flexibility to cut the cord without inconvenience, further spurring the switches.
Clint Wheelock, the director of wireless research for In-Stat/MDR, notes that the wireless providers are trying to balance the trend. The wireline/wireless combo companies, such as Verizon and now Cingular, are interested in the growing number of customers who are considering cutting the cord, but they are prioritizing. "Verizon wireless is the growth engine of voice, and they are likely to look at the [wireline] future from a broadband perspective," Wheelock remarked.
T-Mobile and Nextel, companies without a wireline component, are more likely to be aggressive toward driving substitution, using bundling with other types of services as an incentive.
In-Stat/MDR found that those most likely to discontinue wired phone service are 18 to 24 years old, single, residing in an urban area, subscribers to Sprint and T-Mobile, and are mobile data users.
Meanwhile, Insight Research noticed a trend in residential long distance usage, finding that as the wireless minutes increased, the wireline minutes decreased. Consumers are buying bundles of wireless minutes where long distance costs are hidden, allowing for substitution. Also, free night and weekend wireless calling drives consumers to the phones too.
|Residential Use of Long Distance, |
Average Minutes per Month
|Wireless||4 minutes||34 minutes|
|Wireline||97 minutes||52 minutes|
|Source: Insight Research|
Robert Rosenberg, president, Insight Research, noted that the biggest increase was seen from 1999 to 2000 during the economic boom when consumers had more discretionary income. "By 2001, there was increased competition among wireless providers and the industry started cutting prices significantly." Rosenberg continued, "This was in the midst of a declining pocketbook among consumers."
While it may seem like there will be an eventual migration from wired to wireless, Rosenberg says that there isn't likely to be a substitute for the performance of a wireline phone. "Wired phone reliability can not be duplicated by any reasonable economic method," said Rosenberg. Making a wireless network as reliable would be cost prohibitive.
Like Wheelock, Rosenberg sees wired phones eventually acting as broadband access points, where residential consumers might place greater emphasis on data reliability than voice communications.
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