long-run patterns in communications service adoption

Communications services today are perceived to succeed or fail within months.  Within that time, fashion may be more important than economic fundamentals, and long-run patterns can easily be obscured.  Historical data helps to provide an alternate view.

Consider telephone service in the U.S. in 1927 and 2007.   In 1927, telephone service had been widely available for more than forty years.  Nonetheless, only about of third of U.S. households had telephone service.  By 2007, the share of households with telephone service had risen to about 95%. Telephone service was a remarkable innovation. But telephone service became nearly universal among U.S. household only after about a century of industry development.[1]

Business telephone take-up was more consistent than residential service take-up.  Residential phones per home and business phones per non-primary-sector employee are calculable statistics for considering variation in telephone take-up across states.  In 1927, residential phone take-up had 50-80% larger variation across states than did business phone take-up. By 2007, residential phone take-up varied 10% less across states than did business phone take-up.[2]

Business communications service adoption probably depends more on economic fundamentals (economic advantage) and less on fashion than does consumer communications service adoption.  That suggests slower, but more even adoption for business communications services.

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Data: business and residential phone take-up across U.S. states, 1927 and 2007 (Excel version)


[1] See estimates of the share of U.S. households with telephone service, 1920-2007.

[2] The statistics for 2007 are for telephone lines, not phones, and for households, not homes.  These differences probably do not explain the change  from 1927 to 2007 in take-up variation across states.  The 2007 data includes only ARMIS-reporting incumbent local-exchange company telephone lines. In 2007, those lines amounted to about 77% of wireline local switched-access telephone lines.  How reporting coverage correlates with the business/residential line ratio isn’t clear.

COB-43: bureaucrats contribute to their own support

Bureaucrats do not merely sit at their desks, calmly floating in an environment that outside energy supports.  Bureaucrats play an active role in generating their own support.  Scientists that levitated a frog insightfully explain:

As you might well know, all matter in the universe consists of small particles called atoms and each atom contains electrons that circle around a nucleus. This is how the world is made.

If one places an atom (or a large piece of a matter containing billions and billions of atoms) in a magnetic field, electrons doing their circles inside do not like this very much. They alter their motion in such a way as to oppose this external influence.

Incidentally, this is the most general principle of Nature: whenever one tries to change something settled and quiet, the reaction is always negative (you can easily check out that this principle also applies to the interaction between you and your parents). So, according to this principle, the disturbed electrons create their own magnetic field and as a result the atoms behave as little magnetic needles pointing in the direction opposite to the applied field. [footnotes omitted]

The result is levitation of the frog in the magnetic field.  Confronted with external energy directed toward change, bureaucrats also act according to this most general principle of Nature.  Each of the billions of atoms in each bureaucrat’s body generates a counter-reaction.  Bureaucrats’ active interaction with the energy around them not only generates support for bureaucrats, but actually enables bureaucrats to fly.

Other bureaucratic reports this month:

Suthichai Yoon reports that the Prime Minister of Thailand has formed a Coordination Committee to monitor Cabinet decisions.  Coordination ranks only behind editing documents in bureaucratic importance.

The babu blogger reports that three bureaucrats were selected for India’s prestigious Padma Bhusan award on the eve of India’s 61’st Republic Day.  One of these administrative leaders is PR Dubhashi, a 1953 batch Karnataka cadre IAS.  Mr. Dubhashi has an impressive record of bureaucratic service:

After being trained at Metcalfe House, he began his career as an SDO in Davangere and later became deputy commissioner in drought-prone Raichur in 1958-59. … He also held some key posts like Establishment Officer (1978-80), additional secretary in ministry of agriculture (1980-81) and director of Indian Institute of Public Administration (IIPA).

He rose to the position of secretary in the Prime Minister’s Office (PMO).  Mr. Dubhashi also wrote a book, Pursuing Idealism Through Civil Service: Memories Of An Administrator And A Trainer. We join persons in India and around the world in celebrating Mr. Dubhashi’s service.

Yoko Kubota reports that Japanese Finance Minister Naoto Kan has launched an initiative to encourage bureaucrats to go on dates on weeknights. Ms. Kubota observes:

How exactly Kan plans to get the bureaucrats to go on dates is still unclear, though. In good bureaucratic fashion, he is setting up a team to come up with the details of the plan. …

“If we can go home early, I’m sure I could go on dates more often,” one bureaucrat told me. “That is, if I can find someone to go with.”

This is a serious problem that deserves further study.

In England, Tamara Cohen reports  that Emma Chapelhow, age 13, is suing the U.K. Child Support Agency (CSA) over its determination to collect £43,000 in backdated payments from her father to her biological mother. Emma has lived with her father since 2007.  Ignorant persons might question why these backdated payments from her father to her biological mother are called “child support”. The reason is simple: they are required by the Child Support Agency. The child Emma complains in her suit that the Child Support Agency’s enforcing of these payments will bankrupt her father and force her into poverty.  In addition:

the teenager claims that, four months ago, she was left in tears after bailiffs acting for the CSA allegedly threatened to take her pet pony Pringle to help meet the payments.

We regret the hardships that this girl faces, but the Child Support Agency is a major organization that transfers a huge amount of money from men to women under the force of law.  Sometimes a girl has to be sacrificed for the sake of the organization.

Everett Sizemore describes the regulation of chickens in Denver:

We can have chickens here, but must jump through some fairly asinine bureaucratic hoops and pay fees so high they make the whole exercise counterproductive. First you submit an application to Animal Control, which costs $50. Then they come out to inspect the site, never having actually provided any guidance on what standards you’re supposed to meet. If these people approve you (never mind the fact that they’re trained to deal with dogs and cats and most don’t even seem to realize a chicken doesn’t need a rooster to lay eggs) then you’re on to the zoning department. You will be required to contact the neighborhood organization and council member for your area, and post two notices at two different times in your front yard, informing any neighbors (not just next door, but from blocks away) of their right to object. Why they can object to you having a Nigerian Dwarf goat while you can have nothing to say about their five great danes has yet to be answered – but, providing they don’t object after 30 days, you can now purchase a permit for $100. This permit costs $70 for renewal every year. Keep in mind this is only for the chickens you had at the time. Should one of your hens die (and they only lay well for 2-3 years) you’re supposed to pay again for their replacements.

Here at the Carnival of Bureaucrats, we lack expertise in chickens.  However, a bureaucrat’s cousin has a dove that laid an egg (sadly, like Mr. Sizemore’s chickens, without the love, companionship,and freely given support of a male dove). Apparently a pet dove can lay an egg without a permit.  Rather than bashing bureaucrats, we suggest that Mr. Sizemore rename his chickens to be doves.

Rob Roberts outrageously encourages Toronto residents to ignore impressive regulations that include a formal textual citation. Around a pond in Toronto, which is far north in Canada, are signs that state: “Danger. Ice unsafe. Keep off. Municipal Code #608.” Mr. Roberts quibbles that the ambient temperature has been -10 degrees centigrade for at least a week. However, regulations are not made for special cases such as Canadian winters.  He huffs that  playing hockey began on a pond in Canada.  That’s logically no reason for it to continue on ponds in Canada.

That’s all for this month’s Carnival of Bureaucrats.  Enjoy previous bureaucratic carnivals here.  Nominations of posts to be considered for inclusion in next month’s carnival should be submitted using Form 376: Application for Bureaucratic Recognition.

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Images courtesy of the High Field Magnet Laboratory, Radboud University Nijmegen, the Netherlands.

communications bill auditing and consulting

Analysis of actual prices paid for communications services is likely to be more valuable to consumers than surveys of advertised offerings and prices.  Rapidly increasing number and variety of offerings and prices makes price surveys more difficult and less useful.  Historically, a small industry of communications service consultants has provided bill auditing and service-choice consulting for larger businesses.  Web-based applications with software interfaces to online communications accounts can scale communications bill auditing and consulting to millions of individual consumers.  Look for the growth of mint-like businesses customized for communications services.

More personal information and fewer choices are easier for consumers to process and more readily attract consumers’ attention.  “How much did I pay?”  “Can I pay less?”  These are easily understandable, personally engaging questions.  Rather different are other questions: “How much would I have to pay if I were to subscribe to each of a large number of competing services?”  The answer to that question usually depends on another subjunctive question: “What would be your pattern of use of some service offering that you don’t currently have?”  Projections like these typically interest only economists, not normal persons.

Surveys of advertised prices cannot provide personally relevant price weights.  The OECD conducts relatively sophisticated, wide-ranging surveys of communications service prices that are reported in its Communications Outlook (see chapter 7).  The OECD calculates price indices using a standard basket of monthly service use.  Individual consumers’ patterns of use, in contrast, vary greatly.  Other surveys of prices, such as the Irish communications regulator’s call cost comparisons and an independent U.K. company’s tariff compilations, do not attempt to aggregate prices.  These arrays of prices require considerable effort to evaluate.

Surveys of advertised prices can easily miss relevant prices.  For example, early termination fees for mobile phone service contracts have recently attracted concern in the U.S. Most advertised service offerings obscure early termination fees.  Such fees are not included in the OECD’s mobile phone service price comparisons.  Franchise fees, device rental fees, activation fees, a variety of taxes, and other charges also appear on communications bills.  Data collected from actual bills is a much better source of prices actually charged than are surveys of advertised prices.

An on-line communications bill analysis service could generate information directly relevant to an individual consumer’s budgeting and service-use choices.  Average price per minute, per call, and per text message often relate obscurely to the effects of incremental use changes on the total bill.  But intelligently programmed bill analysis could answer budget-relevant questions: “How can I change my service use to reduce my bill by $10 per month?”  “How much would it cost me to make 10% more mobile phone calls?”  With data collected from many users, an online service could identify all charges, including low-frequency charges such as early termination fees.  Aggregate bill data would provide a valuable resource for responding to consumers’ service-cost queries and recommending service plan changes, including switching service providers. Unlike services apparently based on lead-generation fees from recommending switching service providers, a web-based, on-line bill analysis service could provide more data-intensive, broader-ranging, more credible auditing and consulting services.

structural change boosts business communications

Because large business customers are much larger and more geographically concentrated than large residential customers, business communications services tend to be more competitive than residential communications services.  Nonetheless, from 1980 to 2007, business lines rose from 25% to 37%  of public switched telephone lines of larger U.S. incumbent local-exchange telephone companies.[1]  Over that same period, the share of manufacturing employment in employment outside of agriculture, mining, and forestry (non-primary-sector employment) fell from 20% to 10%. Employment in various service industries increased.  Service industries purchase more communications services than traditional manufacturing industries.  This structural shift toward businesses that demand more communications services probably at least partly explains the increasing share of business lines in incumbents’ telephone service.

Aggregate demand for business telephone lines has been more robust than aggregate demand for residential telephone lines.  Incumbent providers’ line counts for both classes of lines grew through the end of the twentieth century, then declined.  But the growth was greater for business lines and the decline, less. Residential telephone lines per household was 0.94 in 1980 and 0.84 in 2007. Business telephone lines per non-primary employee, in contrast, was 0.27 in 1980 and 0.41 in 2007.

Residential telephone growth prior to 1980 came up against economic and political constraints. The share of households with telephone service grew from 33% in 1920 to 92% in 1979. Possibilities for growth through providing residential telephone service to household that didn’t have any service were thus mostly exhausted by 1979.  The number of telephones per telephone household grew from 1.1 in 1920 to 1.8 in 1979. The Carterfone decision in 1968 formally allowed competition in the provision of end-user telephone equipment.[2]  Then the AT&T Modified Final Judgment took Bell Telephone companies out of the telephone equipment manufacturing business.  Thus selling end-user equipment (telephones) became less attractive to telephone companies.

Business telephone growth prior to 1980 benefited from structural economic change. As early as 1902, many businesses that used telephone service had installed private branch exchanges.[3]  Yet in 1900, about a third of the workforce was engaged in agricultural pursuits. Business telephones per non-primary-sector worker rose from 0.14 in 1920 to 0.47 in 1979.  That increase occurred in conjunction with agricultural employment falling from 29% of the workforce to 4% of the workforce. The share of manufacturing employment was about the same, so the employment shift can be broadly understood as a shift from agricultural employment to service-sector employment.  Service-sector employment growth has been a constant for business telephone service growth across the twentieth century.

Data: U.S. telephone and economic structure statistics, 1920 to 2007 (Excel version).

[1]  See the all – summary worksheet in the data workbook.  These statistics are for local-exchange telephone companies providing service prior to 1996 (incumbent LECs ( ILECs)) meeting the FCC reporting requirements for ARMIS report 43-08. The relevant requirement is revenue greater than a revenue threshold that was $100 million in 1992 and $138 million in 2007.

[2] After the Carterfone decision, subsequent regulatory battles delayed the mass-market sale of non-telephone company telephones for a decade. Non-telephone company telephone sales amounted to about 1 million telephones in 1978, the first year of mass-market availability, and were expected to reach 2 million in 1979.  See Brock, Gerald W., The Telecommunications Industry: The Dynamics of Market Structure (Cambridge: Harvard University Press, 1981) p. 249. Thus aggregate telephone-company telephones represented at least 99% of total installed telephones through 1979.

[3] In New York City about 1900, more operators were employed at private branch exchanges than in telephone company offices.  See Census Bureau, Telephones and Telegraphs, 1902, p. 49.