Americans use fewer fixed telephone lines as competition increases

The core local telephone business dominated by the Baby Bells -- the regional operating companies spun off by the giant monopoly AT&T nearly 20 years ago -- is shrinking, reports the New York Times.

In the 1990s, new companies tried (and generally failed) in competition with the Bells to provide local telephone service.

  • In every year since the breakup of AT&T, from 1984 until 2000, the number of lines served by the nation's incumbent local carriers increased.

  • In fact, line growth accelerated in the mid-1990s, as consumers added second lines for dial-up computer modems.

  • By 2000, the incumbents served about 187.6 million lines, according to Federal Communications Commission (FCC) reports.

    But in the past two years, almost 10 percent of the lines disappeared, and by 2002, the most recent year for which data is available, the incumbents were serving only 169.9 million lines.

    What happened?

  • Consumers shut off their second lines as they moved toward Internet services that do not require tying up a normal phone line.

  • Alternative local phone companies have increased their market share from 8 million at the end of 1999 to almost 25 million lines at the end of 2002

  • Also, big cable television companies are now estimated to have more than 2 million telephone customers.

  • And the Pew Internet and American Life Project estimates that 2 percent of Americans have canceled traditional phone service in favor of a cell phone and that an additional 20 percent have seriously considered such a move.

    Analysts expect FCC rulings that allow cellular customers to take their phone numbers with them when changing carriers, and to transfer their home telephone numbers to cellular phones will give customers another reason to consider doing without wireline telephone -- the heart of the Bells' business.

    Source: Seth Schiesel, The Bells Struggle to Survive a Changing Telephone Game, New York Times, November 24, 2003.

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    FMF Policy Bulletin\25 November 2003
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