Cellphone Spending Surpasses Land Lines

WASHINGTON, D.C. (AP) — With Americans cutting the cord to their land lines, 2007 is likely to be the first calendar year in which US households spend more on cellphone services, industry and government officials say.

The most recent government data show that households spent $524, on average, on cellphone bills in 2006, compared with $542 for residential and pay-phone services. By now, though, consumers almost certainly spend more on their cellphone bills, several telecom industry analysts and officials said.

“What we’re finding is there’s a huge move of people giving up their land line service altogether and using cellphones exclusively,” said Allyn Hall, consumer research director for market research firm In-Stat.

As recently as 2001, US households spent three times as much on residential phone services as they did on cellphones. But the expansion of wireless networks has made cellphones more convenient, and a wider menu of services, including text messaging, video and music, has made it easier for consumers to spend money via their cellphone.

“Frankly, I’d be shocked if [households] don’t spend more on cellphones at this point,” said Andrew Arthur, vice president of market solutions at Mediamark Research & Intelligence.

To be sure, when corporate cellphone use is counted, overall US spending surpassed land line spending several years ago, analysts said.

While there are roughly 170 million land lines in use nationwide, industry officials estimate there are close to 250 million cellphones. (These figures include residential and corporate use.)

Eric Rabe, senior vice president for media relations at Verizon Communications Inc, said the company’s wireless revenue has grown between 15 percent and 20 percent annually for the last five years, whereas its traditional land line business has been flat year to year, in large part because more than 90 percent of U.S. households already have them.

While Mr Rabe would not break out exactly how much Verizon’s residential customers spend on cellphones versus land lines, he said cellphone spending is clearly rising along with the growing popularity of text messaging and other services.

“As a company that once made the vast, vast majority of its revenue on phone calls, for ten years we’ve been moving away from that and trying to reestablish ourselves in other businesses because we could see the traditional telephone was a mature business, it was not going to grow and indeed might even shrink,” he said.

AT&T Inc did not immediately return a call seeking comment about its residential customers’ spending breakdown.

Joe Farren, a spokesman for the wireless industry’s main trade group, said household cellphone spending is not something his group has tracked, but he added it does not surprise him if US households now spend more on cellphone bills than on their traditional phones.

The 2006 phone spending data, collected by the Labor Department as part of a consumer expenditure survey of 7,500 households, asked respondents what they paid on personal local and long distance services and cellphone plans, including taxes.

Brett Creech, an economist with the Labor Department’s Bureau of Labor Statistics, said Internet-based phone service was counted among expenditures for residential land line service. However, so-called voice over Internet protocol (VIOP) will be a separate line item in the 2007 survey.