The end of landlines? What will it mean?

Here’s one for those of you looking at examples of ways in which social and technological change can shape a business. A recent Economist article asks about the consequences of our massive shift from landlines to mobile phones.

According to the article, US telecoms operators are seeing customers abandon landlines at a rate of 700,000 per month. Some analysts now estimate that 25% of households in America rely entirely on mobile phones - a share that could double within the next three years. It’s easy to see how existing telephone operators will be hurt, with their significant investments in the current fixed line network. But it’s also likely to hurt all business that require landlines, as bills rise and business models are disrupted. It could even threaten the work of the emergency services, such as the police and fire brigade. The call-tracing software used by firefighters, ambulance services and many other “first responders” only works on landlines.

The recession may have speeded up cord-cutting since people want to save money and are readier to sacrifice their landlines than their mobiles. Yet many businesses depend on landlines. First to suffer are telemarketers. Mobile numbers are harder to get hold of, and in most cases it is also against the law for telemarketers to call them (although many still do), since mobile users in America are charged for receiving calls as well as making them.

The problem extends to market research firms. Most pollsters ignored mobiles until early last year. This all had to change during the US presidential election when it became obvious that by ignoring mobiles, polls were underestimating Barack Obama’s popularity.

The telecoms operators themselves don’t seem too worried and have seen this trend developing over several years. But the accelerating loss of landlines will put increasing pressure on profit margins as the high fixed cost of running the network is spread over an ever smaller number of customers.