Mobile Phone Spending Exceeds That of Landlines

The U.S. Bureau of Labor Statistics reports that at the beginning of 2007, mobile phone expenditures exceeded that of expenditures for residential landline phone services. This marks the first time ever in the U.S. that consumers had spent more for mobile phone services than for traditional landline phone services.

The Bureau of Labor Statistics estimates that in 2001, 75 percent of consumer expenditures for telephone services were spent on landlines, with only 23 percent of expenditures on mobile phone services (the other two percent was devoted to things like phone cards and pager services). In 2006, spending for the two were nearly identical; and starting in 2007, 54.8 percent of consumer spending went to mobile phone services, while only 43.4 percent went to residential land lines (the remaining 1.8 percent includes calling cards and VoIP).

 Credit: Bureau of Labor Statistics

Consumers have steadily been paying more annually for mobile phone services year after year, while spending for residential landline services has dropped. In 2001, the average consumer spent $686 a year for residential landline phone service, and $210 per year for mobile phone service. But in 2007, consumers paid on average $608 per year for mobile phone service, and $482 per year for a residential landline. This represents a 189.5-percent increase in mobile phone expenditures, but only a 29.7-percent drop in residential landline services. Even as mobile phone use rose and landline use dropped, consumers were still paying 21.4-percent more for their combined phone services then they were paying in 2001--a $196 increase.

Nielsen released a report last year that stated that approximately 17 percent of U.S. households had given up their landlines completely and were relying solely on their mobile phones for their phone service at home. The report theorized that the primary driving factor for this was consumers looking "for ways to cut household spending." For frequent mobile phone users, landlines might very well seem like redundant expenses. But saving money is likely not the only driving force here.

 Credit: Bureau of Labor Statistics

Another variable is that many members of the younger generations are growing up in society where mobile phones are nearly ubiquitous. In 2001, those between the ages of "under 25" and 54-years old spent between 25.0 and 26.3 percent of their total telephone service expenditures on mobile phone services. In other words, people at a wide range of ages were all spending about the same for mobile phone services. Fast forward to 2007, and the "under 25" group had jumped to spending 75.2 percent of its telephone service expenditures on mobile phone services--that's a 185.9-percent increase. The group with the next biggest change was those in the age range of "25 - 34 years," who saw a 152.9-percent increase, now spending 66.5-percent on mobile phone services. All age groups saw a noticeable increase, but the largest boost by far was with the "under 25" crowd. It is also important to note that many mobile phones are capable of doing things that traditional landline phones cannot, such as send and receive text messages, shoot and send pictures, play music, play games, and even browse the Internet.

The continued growth of cell phone use and the decline of residential landline use is probably not a surprise to many--especially as cell phone providers become increasingly competitive with the prices for their unlimited plans, such as Boost Mobile's recently-unveiled, unlimited nationwide mobile plan for $50 per month. Many of the traditional residential telephone companies also offer mobile services as well, so that as one side of their business decreases, at least another side can pick up the slack. It is uncertain, however, if cable companies with their VoIP-based residential phone services will ever be able to compete with cell phone services.