Plain-old, fixed-line telephone service is shrinking rapidly. Consider US West, which became Qwest in 2000. It is a large local exchange telephone company (a former regional Bell Operating Company) serving the northwestern and mid-western U.S. US West – Qwest’s fixed-line residential and business switched-access telephone lines grew 3.3% and 6.0% per year, respectively, from 1991 to 1999. In contrast, residential and business telephone lines fell 5.7% and 4.6% per year, respectively, from 1999 to 2008.[1] A major reversal like this is probably typical of incumbent wireline telephone companies across the world. It implies serious business difficulties.
Trends in sub-categories of telephone lines point to effects of technological innovation. Because using a telephone line for dial-up Internet access doesn’t permit simultaneously using that line for telephone service, dial-up Internet access was an important driver of growth in non-primary residential telephone lines in the late 1990s and early 2000s. Non-primary residential telephone lines grew 9.9% per year from 1997 to 2001, compared to -0.4% growth in primary residential lines. Home dial-up Internet access peaked at 40% of U.S. adults in 2001 and fell to about 8% of U.S. adults in 2008.[2] From 2001 to 2008, non-primary lines fell 13.9% per year, while primary lines fell 6.2% per year. A large share of the greater fall in non-primary lines comes from the shift from dial-up to broadband Internet access.
That non-primary telephone lines are more vulnerable to mobile-telephone (wireless) substitution probably also contributed to the more rapid fall in non-primary residential lines. In 2008, non-primary residential lines accounted for only about 10% of residential telephone lines. In multi-person households, wireline telephone lines are not personal telephone lines. Mobile phones, in contrast, are almost exclusively personal telephones. That’s a valuable feature of a mobile phone.
Centrex lines feature in competition between an early cloud service (telephone company network service) and a local service (local private telephone system, called a PBX). U.S. West – Qwest Centrex line counts fell 13.2% per year from 1999 to 2008. These data do not mean that cloud services are losing in this field. Incumbent telephone companies have fostered the development of “IP Centrex“. The fall in Centrex lines may reflect Qwest moving Centrex lines to Centrex-like services not subject to the regulations of traditional Centrex lines.
Centrex service, like telephone service more generally, now have a wide range of technical and business possibilities for service provision. Bill Michael’s 2001 article, “The New Centrex,” describes the early jockeying for positions among a broad array of companies interested in Centrex-like services. Now Google Voice provides something like a personal PBX, while Amazon and a variety of other companies are offering cloud services. While the future is uncertain, telephone companies that survive will surely become something other than traditional telephone companies.
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Data: US West – Qwest telephone lines, 1991-2008 (Excel version); US West – Qwest common-line basket rate detail, with relevant line codes and some state-by-state figures; ARMIS switched-access telephone line counts for US West – Qwest by state; US West Price and Demand Dataset, 1992-2009.
Notes:
[1] All the discussion and data in this post concerned switched-access telephone lines. Among traditional telephone company services, switched-access lines are distinguished from “special access” lines. Network configurations like a “leaky PBX” exploit that distinction. The residential and business lines of concern here are lines that allow an end-user to make telephone calls on the public switched telephone network through use of their local telephone company’s end-office switch.
[2] For figures for adult dial-up shares are from the Pew Internet’s survey figures for trends in home internet access: broadband vs. dialup. The Center for the Digital Future’s Digital Future reports show 88% of U.S. internet users accessing the Internet via dial-up in mid-2000, compared to 16% accessing via dial-up early in 2009.