U.S. households continued to “cut the cord” and replace landline telephones with wireless voice service in the second half of 2013, according to the latest wireless voice data from the Centers for Disease Control (CDC). These data reinforce and strengthen USTelecom’s view that providers of traditional telephone service are no longer dominant in the provision of voice communications.
The CDC data, based on a survey conducted from July through December 2013, found that 41 percent of U.S. households were wireless-only in the second half of that year. Just over 8.5 percent were landline-only households. Approximately 2.5 percent of U.S. households had no telephone. The remainder, a little less than 48 percent, had both wireless and landline telephones. Of these dual-use households, more than 16 percent were “wireless-mostly,” meaning they received all or most calls on a wireless phone. Combining wireless-only and wireless-mostly households, more than 57 percent of U.S. households depended on wireless either exclusively or mostly by the second half of 2013.
Wireless cord-cutting and other landline alternatives, such Voice over Internet Protocol (VoIP), have eroded the household share of traditional landline telephone providers known as “incumbent local exchange carriers” (ILECs). USTelecom recently estimated that the share of telephone households using traditional ILEC switched telephone service had fallen to approximately 28 percent by end of 2013 and would likely fall to only 18 percent by the end of 2015.
The latest CDC wireless voice data and FCC wireline voice data indicate that these projections may be conservative and ILEC switched telephones may be falling even faster than projected: although wireless cord-cutting slowed in the first half of 2013 to 1.2 percent of households, as USTelecom noted in a prior blog, the pace re-accelerated to 1.6 percent of households in the second half of 2013. In addition, the pace of ILEC switched line losses did not decline in proportion to the slowdown in cord-cutting, as USTelecom’s recent estimates conservatively assumed. For example, the number of new cord-cutting households fell by 20 percent during this six-month period: 2.0 million in the first half of 2013 down from 2.5 million in the second half of 2012. During the same period, the number of ILEC switched residential telephone line losses remained relatively flat, with 3.3 million losses in the first half of 2013 compared to 3.4 million in the second half of 2012.
The CDC report noted the pace of cord-cutting had slowed in 2013 compared to prior years. While this is true, it does not alter the trend underlying USTelecom’s view that traditional wireline providers are no longer dominant in voice telephony. First, the share of telephone households without landlines is approaching 45 percent in 2014 — a large and significant portion, which USTelecom analysis suggests is likely to continue to grow. Second, a slowing pace does not imply the direction of the trend is changing. Wireless-only voice subscriptions are likely to follow a typical adoption curve, where an initial acceleration is followed by deceleration — a slower rate of growth, but growth nonetheless. This pattern will play out in broad strokes over the long term. Short-term volatility in the trend cannot be extrapolated. Wireless cord-cutting has decelerated several times in the past and has picked up afterwards. While there is no guarantee this will happen in the future, such an outcome cannot be dismissed. Third, as a case in-point and as noted above, the CDC data show the pace of cord-cutting re-accelerated in the second half of 2013. Fourth, the percentage of “wireless-mostly” households increased to 16.1 percent in the same time period after several years of decline, from 16.4 percent in mid-2011 to 15.7 percent as of the mid-2013. “Wireless-mostly” is a leading indicator of cord-cutting, as customers move from dual wireless and wireline usage, to predominantly wireless usage, to eventually dropping their landline.
In summary, while the pace of wireless cord-cutting may have slowed a bit, the phenomenon has not gone away and there is no reason to believe that the trend will either stop or reverse any time soon. Today in mid-2014, approximately 44 percent to 45 percent of U.S. households have already cut the cord. This is a significant amount — more than 50 million households — and the figure is likely to approach 50 percent of U.S. households over the next couple of years, further supporting USTelecom’s long-held view that ILECs are no longer dominant voice providers.
Analytical Note: USTelecom’s estimated wireless-only household shares differ slightly from CDC’s published figures. There are two main reasons. First, since the CDC data are based on a six-month survey, they reflect a midpoint of those six months, or about the end of the first quarter. USTelecom adjusts the CDC figure based on growth trends to reflect mid-year. Second, the CDC figures are given as percentage of total households. That base includes non-telephone households, which are irrelevant to share calculations. So USTelecom adjusts to exclude non-telephone households from the base. For detailed explanation of USTelecom’s methodology, see the Appendixes to our April 2014 and November 2013 voice share projections.