Wireless vs. Landlines: Past the Point of No Return

For about three years I have thought that POTS (plain old telephone service, aka Land lines) are no longer a necessity and I go as far as labeling them a needless home expense. Cable companies are providing phone service through VoIP and the phone companies were right behind and are now led by Verizon (VZ) with its FiOS service. Many people in this hard hit recession are also moving the nation forward technologically to save money, but they are going wireless.

Pete Carey of the Mercury News put the stats into an article on May 6th that caught my attention.

We're by no means a wireless nation yet, but with a push from the recession, for the first time American homes with cell phones but no landline outnumbered those with landlines but no wireless devices.

The crossover occurred in the last half of 2008, according to the Centers for Disease Control and Prevention, with a nearly 3 percentage point jump in wireless-only households in the second half of 2008. The CDC released the new data on American cell phone usage Wednesday.

Just over 20 percent of American homes are cell phone-only now, while 17 percent of households have landlines but no cell phones. About 60 percent have both, and 1.9 percent have no phone at all.

The CDC studying poverty is the angle of Mr. Carey’s post. I examine this trend as an investor.

This leads me to ponder the direction of the industries: hardware, phone connections, switches; the value chain is vast. I first noticed some of the younger people I work with provide their home numbers for internal lists as their cell number. This is becoming ubiquitous in areas with great cell coverage such as NYC.

Currently in the portfolios I manage we hold Apple Inc. (Nasdaq: AAPL) and Research In Motion Limited (Nasdaq: RIMM) on the smart phone side (I know, some say it is sacrilege to own both), Nokia Corp. (NYSE: NOK) for more basic hand sets, and AT&T Inc. (NYSE: T) and Verizon Communications Inc. for wireless coverage.

These are the leaders in their respective area with RIMM over taking AAPL for the most single model of smart phone sold Q109 and T and VZ covering the nation with wireless perhaps the best.

The conversation doesn’t end here though, I worked on wireless firms going public in the 1980s and have watched the industry grow and now mature. The value chain goes deeper. The job for managers is to uncover where the next sustainable competitive advantage will be achieved. This is how shareholders can help move an industry forward and profit if they can identify the leaders of the next decade.

Disclosure: Mr. Corn is Chief Investment Officer – Equities of Beacon Trust Company. Through various equity strategies under his supervision he is long AAPL, RIMM, NOK, T and VZ.

Comments

[jamstermedia:]

it can be easier to secure landline's vs airwave
if you tap a line equipment can detect and tell distance to corrupted
point.... airwave intercepts can be recorded and de-crypted even if it
takes a few hour's.... this i know...

May 08 04:45 AM

[milos621:]

To place Nokia, worlds biggest smartphone manufacturer in "basic handset" category is totally stupid. And iPhone isn't a smartphone at all.

May 08 06:45 AM

[Murphy Mac:]

Things would be a lot different if the POTS providers had bothered to innovate AT ALL. What have they done since adding voicemail and some very basic features like call forwarding all those years ago?

Same with the cellular industry. Why did it take Apple to force something as obvious as visual voicemail?

The landline industry has ignored the VOIP phenomenon going on around them - too slow to even offer new features as PAID services. And now Google is going to offer more than the Bells ever would have dreamed of charging us for - for free.

We never learn about monopolies. Time Warner wants to charge us for Internet consumption by use, fine. But they don't even have the means in place to tell us what we consume. Like other monopolies they're fat and lazy - they just want their check.

Google is taking these businesses apart - like the Fed should have.

May 08 07:56 AM

[JamesApple:]

Apple coined the term 'smartphone' in June 29, 2007 when of released the iPhone. The term 'smartphone' never existed before.
Nothing can be faster and carry more data than the Fiber Optics land line running at speed of 44 billion bits per second. Fiber Optics line maximum speed is the speed of light itself. The fastest wireless speed is only 108000 bits per second which is a dead turtle compared with Fiber Optics.
Civilisations are defined by the capabilities and speeds in the way things are done. It won't take long before China and India to fully exploit Fiber Optics land lines to catapult their civilisations over the rest of the world communicating at the speed of light as North America keeps on counting apples and blackberries at 108000 bits per second.
A smartphone is defined by the ability to install and run applications locally on the iPhone, without having to rely on the pre-installed phone functions, or some applications and services running on another machine (Google web server for example). Convenience is nice, but a powerful and rich economy is bliss.

May 08 08:24 AM

[JamesApple:]

Apple focuses on innovations, others focus on profit only even to the point of giving away their products in Buy1 Get1 campaigns. Companies like Apple will thrive on while Rim will surely RIP soon. As applications take precedence it is the local processing power of the device that matters most, Fiber Optics assisted communication providing lightspeed and extreme security and bandwidth will be the norm with wireless serving the UI (View) level only, not at the application data and processes level.
4G tops out only around 4 gigabits per second, Fiber Optics supports data travelling at the speed of light.

May 08 11:13 AM

[Wisdom vs. ...:]

jamesapple, most likely, china and india will go with distributed communications (and power) b/c it is much cheaper than building a grid.

May 14 09:56 PM

[Peter Medved:]

JamesApple wrote:

Apple coined the term 'smartphone' in June 29, 2007 when of released the iPhone. The term 'smartphone' never existed before.

James, maybe you are a little "blinded" by your obvious
Apple bias ? Smartphone term has been used in telecom
industry for a long time.
en.wikipedia.org/wiki/...

iPhone is good handset, I have one. But am not of the opinion
that it is answer for everyones mobile needs. Why does a rural farmer in India need it ? Nokia & others, like Samsung & LG address these issues.

Sep 10 08:05 AM