For the better part of 100 years, the landline was the primary means of telephonic communication between consumers and between businesses. It helped create everything from the answering machine to the fax. Add telephone marketing to that list.The landline phone was so important that Congress made sure that even farmers had access to one.
This year, for the first time, household spending on cellular service will pass landline expenditures. According to The Associated Press "the most recent government data show that households spent $524, on average, on cell phone bills in 2006, compared with $542 for residential and pay-phone services. By now, though, consumers almost certainly spend more on their cell phone bills, several telecom industry analysts and officials said."
That news is not as good as it might seem for the cellular companies. That is because they are also the largest providers of landlines. AT&T (T) and Verizon (VZ) have posted impressive returns on their wireless businesses over the last five years, but there are now 250 million cellphone in a country with 300 million people. Investors can assume the the population under five years old and over 100 probably do not use the devices. In other words, cellular adoption is probably close to the saturation point.
AT&T and Verizon are likely to continue to watch landline revenue fall. They can take some comfort in their wireless revenue. They can also hope that their fiber-to-the-home broadband and TV services will take enough customers from cable so that these services become big money makers.
The entire evolution of telecoms does leave Qwest (Q) out in the cold. It has no real cell carrier operation. It is planning to do modest upgrades of its network with fiber. But, landline attrition is likely to become an increasing problem.
The landline may be dying off, but with cellular service revenue growth likely to slow, the telecoms may not be as well off as they seem. AT&T and Verizon trade near multi-year highs. But, maybe not forever.
Douglas A. McIntyre
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