U.S. Households Dropping Additional Phone Lines

Some U.S. households are getting rid of their additional phone line, according to research by Gartner’s Dataquest unit, but this isn’t necessarily bad news for the telecommunications industry.

A June survey by Dataquest found that since January of 2001, nearly 6 percent of all U.S. households had replaced a traditional telephony access line with alternative communications modalities. Many of these households are purchasing alternative, feature-rich and higher-priced forms of communication equipment.

“A significant segment of the additional residence lines were never used for voice communications, but rather for dial-up Internet access and faxing, so they were a natural market for upward migration to newly available and affordable forms of data communications,” said Peggy Schoener, senior analyst for Gartner Dataquest’s Telecommunications and Networking group. “Additionally, the increasing mobile nature of society together with competitively priced, technologically viable wireless offerings have diminished the requirement for multiple wired access lines for voice communications.”

Among all the residential access lines replaced since January, 55 percent migrated to high-speed broadband access. The impact of the migration of almost 4 million dial-up lines to higher-priced broadband Internet access has significant revenue implications for those service providers capturing the broadband customer. The majority (70 percent) of these voice lines replaced by broadband migrated to one of the incumbent local exchange carrier (ILEC) high-speed residential services.

With DSL the most popular migration choice, Gartner Dataquest analysts found that the ILECs are capturing a significant portion of the displaced voice access lines. For other market players offering competitive services (such as cable access providers, wireless companies and high-speed access providers) the ILEC losses are their gains.

The number of U.S. household customers subscribing to online services rose 3 percent to 70.7 million subscribers during the second quarter of 2001, according to TR’s Online Census from Telecommunications Reports International (TRI).

Of the six Internet access methods tracked by the TRI survey, five — paid dial-up, DSL, cable modem, Internet TV and satellite — showed increases in subscribers during the second quarter, with the greatest reported increase coming in the nascent satellite category, which increased 52 percent during the quarter, and DSL, which reported a 29.7 percent growth rate. The sixth category, free dial-up access, reported an 11.3 percent decrease in the number of subscribers.

Paid dial-up service showed a modest increase of just over 5 percent for the second quarter, but it remains by far the most popular access method in the United States with more than 52 million subscribers.

In the high-speed access market, DSL was the clear market leader during the second quarter, reporting a 30 percent growth rate, while cable modem services stalled at less than 1 percent growth, according to the survey. However, despite this growth, which the report says may have been a correction for late reporting of first-quarter results by some companies, DSL still needs to overcome significant issues that have taken a toll on the industry’s image, including installation problems, shaky corporate financials, lawsuits and the demise of several companies that had served the sector. In response to some of these issues, some providers have begun offering home installation kits to customers, hoping to cut down on the expense and roadblocks to getting customers up on the service.

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