Will the Traditional Landline Become Extinct?

We’re all aware incumbent wireline operators steadily are losing residential landline voice customers. AT&T Inc. reported 1 million phone line losses in the third quarter this year and Verizon Communications Inc. reported a 12 percent loss in wireline customers over the third quarter last year. In addition, the J.D. Power and Associates ’08 U.S. Wireless Customer Satisfaction Index showed that more than 25 percent of wireless phone customers dumped their landlines and went exclusively wireless. And the overall economic climate seems perfectly poised to accelerate this shift.

Various providers actually are incenting consumers to go “all wireless.” Verizon’s Flex Double-Play, a discounted “landline-less” dual-play bundle that includes only a wireless plan and either broadband or FiOS TV, and Sprint’s $99 Simply Everything wireless plan are both good examples. So, I guess the million-dollar question is, “Will the wireline voice customer actually become extinct?”

In my opinion, the answer is no, not for a long time, at least not in the United States. We’re going to have landline voice customers for the foreseeable future, albeit, in ever-declining quantities. Why? Well, there are at least two, okay maybe three, big reasons — coverage, age and peace of mind.

Roughly 20 percent of U.S. residents live in what the U.S. Census Bureau calls rural areas. In other words, places where you don’t get good enough wireless coverage to “cut your cord.” Granted, the United States is an urbanized nation, and wireless footprints will expand; however, I’m not sure we’ll ever see ubiquitous wireless coverage. Therefore, unless those 20 percent of rural Americans move to, or at least closer to, the big city, they’re going to need a landline telephone service. And, in addition to those rural dwellers, there’s yet another group of us that live in the “burbs” but don’t get quality wireless coverage. I live in a town of about 30,000 people, approximately 30 minutes from Boston. And guess what? My particular neighborhood has terrible wireless coverage. I won’t say who my provider is, but they’re one of the big ones.

Age is another factor. Age and an unwillingness to abandon your wireline phone service appear to be directly proportional. The J.D. Power survey I mentioned earlier showed that only 9 percent of subscribers 65 and older have dumped their landline in favor of wireless, while nearly 30 percent of the 18-24 set have made the switch. So, chances are if you’re old enough to remember when cell phones didn’t exist, then you probably still have wireline phone service at home. Sure, you might switch from Ma Bell to the Cable Co. or even run VoIP over your DSL service, but that’s still a wired connection.

However, the age argument doesn’t actually fare well for the landline phone over the long term, since, according to the U.S. Census Bureau, roughly 25 percent of people in the United States are under 18, with those over 65 comprising just 12 percent of the population.

This brings me to my third and less quantifiable point — peace of mind. Call me cautious, call me paranoid, or call me cautiously paranoid, but in addition to my primary cable voice service, I have a $20 per month basic local Verizon phone service at home (with an old school corded phone attached to it). Why? Because I like the peace of mind that comes with knowing that if I need to make an emergency phone call in the middle of the night when a) the power is out b) the cable modem battery is dead, and c) my cell phone isn’t getting a signal — I can.

Nevertheless, coverage, age and peace of mind won’t be enough to stop landline losses altogether — they will merely keep the wireline voice customer from becoming extinct, at least for the time being. Wireline providers recognize this and are doing some creative things to deal with this reality.

Many are taking a close look at the landline device itself, as well as the services it delivers, with an eye toward making the overall user experience more like that of a mobile phone by integrating Web, wireless and other advanced communications and content features. Good examples of this are Embarq’s eGo landline service with a multimedia screen that delivers news, weather and sports alerts and visual voicemail, etc. Comcast also is planning to deliver an enhanced cordless phone this year that will let users check e-mails, send instant messages and access a “universal” personal address book as well as a yellow pages directory.

So, don’t put the wireline phone in the Smithsonian just yet. Lack of ubiquitous wireless coverage, U.S. population demographics, peace of mind, and even innovation may keep this species off of the extinction list — although probably not off of the threatened species list — for some time to come.

Dave Parks is director of product marketing at Ciena Corp. (CIEN), which provides flexible platforms, intelligent software and professional services to help service providers and enterprises worldwide use their networks to change the way they compete. He is also the marketing committee chairman for the IP/MPLS Forum. Before joining Ciena, Parks was a senior analyst with the Yankee Group covering enterprise Ethernet and IP VPN network services and market trends. Prior to that, he supported product management and marketing for Lucent Technologies and Ascend/Cascade Communications.

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