The Economist predicts
If the decline of the landline [telephone] continues at its current rate, the last cord will be cut sometime in 2025.
But if the telegraph is a guide, it may be longer than that: Western Union delivered the last telegram in early 2006, more than one hundred years after the telephone — although the telegraph was nearly irrelevant for most of that period.
Still, the landline network furnishes a livelihood for hundreds of thousands of employees and more retirees than the auto industry. It’s a major contributor to nonprofit foundations, a significant source of union dues, a big affirmative action employer, a huge source of campaign contributions and it collects enormous tax revenues which politicians and bureaucrats use to reward their patrons and clients.
All this public spiritedness is baked into the price of landline phone service that now must compete against wireless services which offer more convenience at a consistently declining price and Internet-based voice services which offer considerably more features at a fraction of the cost of landline service.
These powerful constituencies — which would like to see the landline telephone industry continue to serve their needs and desires as it does today — oppose deregulation and still have the upper hand.
They portray deregulation as an enemy of consumers of limited or fixed means, but the fact is regulation doesn’t ensure the lowest possible price for consumers. Regulation actually guarantees consumers pay higher prices for the benefit of politically-favored constituencies, such as those mentioned above.
The inconvenient truth (for those favored constituencies) is that technological innovation — which is producing lower-cost alternatives not yet subject to regulation — is killing landline phone service, and politics won’t be able to save it.
Consider the plight of BT (British Telecom): As the Economist also notes BT may not be able to uphold its pension burden without a government bailout.
Regulators ought to let network providers cut costs, select the most efficient technology (frequently not possible under current regulation) and set prices as necessary to remain competitive.
If deregulated, landline service will become cheaper for consumers who can be served at a lower than average cost and more expensive for higher-cost consumers.
Higher-cost consumers have nothing to fear. They will be able to save money by migrating to unregulated — and more efficient — wireless and VoIP offerings whose prices are set by a free market as opposed to regulators whose job is to create winners and losers depending on who is more politically-connected.
Deregulation would increase the chances that most consumers could choose between three categories of competitors — landline, wireless and VoIP. A failure to deregulate could unnecessarily eliminate the landline competitor. Meaning, it could be eliminated by an unnecessary, legacy regulatory burden, and not by full and fair competition in a free market.