Wireless Gaining At the Expense Of Wire-Line Service

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November 10, 2004 (3:30 PM EST)

By Antone Gonsalves , TechWeb Technology News

An increasing number of people are using their cellular phones for long-distance calls, giving them one more reason to dump their wire-line telephone service.

An annual survey of U.S. households on the use of communications services has found that cellular phone users today are making 60 percent of their long-distance calls on their handsets, market researcher The Yankee Group said Wednesday. That number has been increasing steadily year over year, with 35 percent in 2002 and 43 percent in 2003.

"We're seeing long distance as a standalone industry disappearing," Yankee analyst Kate Griffin said.

Wireless carriers offering unlimited plans, which include long distance, is a key driver behind the trend, Griffin said. As a result, consumers are given one more reason to use their wired home phones less.

"People are using more and more minutes year over year, and as they use their cellular phones more, their replacing traditional land lines," Griffin said.

So far, only about 3.5 percent of U.S. households have opted to dump their traditional phone service, a move that's mostly prevalent among young adults and singles. Among the reasons for still having a home phone is for a data line to the computer and having one number to reach the family.

To prevent the replacement of wire-line phones by cellular phones, however, carriers will have to offer both services as a bundle, and begin integrating the services. Carriers, for example, could eventually offer one telephone number, access to email and voice mail and free calling to the home number by a cellular phone.

"You want to begin to connect wireless and wire-line usage, so there is a consumer perception of value (in having both)," Griffin said.

Bundling of services is certainly a plus among many consumers, the annual Yankee survey of about 2,100 households found. The percentage of households interested in having a single provider for all their communications need has risen steadily from 38 percent in 2002 to 49 percent this year.

This is good news for telephone carriers and cable operators, which have been selling packages that include high-speed Internet connections, telephone service and TV programming at a price that's less than if the consumer bought each product separately. The idea is to provide so many services that the customer will find it too difficult to switch to a competitor.

"One way to build loyalty is to tie the products together and then build connections between the products," Griffin said.

Consumers who have bought their wire-line telephone service and their high-speed Internet connection in a package from a single carrier are as much as 40 percent less likely to leave than the average U.S. household, The Yankee Group found.