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Democracy & Technology Blog Going, going, gone: the telephone

Wired telecommunications carriers are one of 10 doomed industries, according to Toon Van Beeck at IBISWorld.

Of the 10 chosen industries that are dying, Wired Telecommunication Carriers is by far the largest, at $154.0 billion in turnover. While this number may sound sizeable, it’s considerably smaller than the $341.8 billion at the end of 2000. Since then, this industry has declined in every year, and it is now close to 55% smaller than it was at its peak; with an additional decline of 37.1% expected in the next six years. While major players like AT&T and Verizon continue to dominate the industry, they are generating lower returns each year as consumers switch to VoIP and wireless products.

That’s a far more significant decline than for newspaper publishing. Newspaper revenues declined only 35.9% between 2000-10, according to Van Beeck. They are forecasted to decline only 18.8% in 2010-16.
What about the satisfied consumers of basic telephone service, whom valiant regulators labor to protect?
In the short-term, phone companies are unlikely to make significant changes in most cases because that would accelerate customer losses. The firms already face a dire future that has prompted a leading newsmagazine to speculate that the last cord could be cut in 2025 at the rate consumers are discontinuing landline service.
In the long-term, with fewer and fewer customers to share the cost of legacy landline networks, basic telephone service will become unsustainable. Since fixed costs are high, when customers discontinue service the cost of serving the remaining customers increases on a per capita basis. Regulation cannot prevent this death spiral.
This will not be a problem for consumers, who can choose between mobile phones and voice services provided over the Internet. Some VoIP services are already free for broadband customers. They may eventually all be free. It won’t be a problem for most wired telecom carriers, either. Since the carriers are also wireless and broadband providers, it’s only the wired operations that are doomed and not the firms themselves.

Hance Haney

Director and Senior Fellow of the Technology & Democracy Project
Hance Haney served as Director and Senior Fellow of the Technology & Democracy Project at the Discovery Institute, in Washington, D.C. Haney spent ten years as an aide to former Senator Bob Packwood (OR), and advised him in his capacity as chairman of the Senate Communications Subcommittee during the deliberations leading to the Telecommunications Act of 1996. He subsequently held various positions with the United States Telecom Association and Qwest Communications. He earned a B.A. in history from Willamette University and a J.D. from Lewis and Clark Law School in Portland, Oregon.