Cell phone industry celebrates its 25th birthday

From the Motorola "Brick" to the iPhone, cell phones have certainly come a long way in the past quarter of a century.

The Motorola DynaTAC handset was the first commercial cell phone. It weighed about 2.5 pounds and cost nearly $4,000

It was 25 years ago today, October 13, 1983, that the very first commercial cell phone call was made. Bob Barnett, president of Ameritech Mobile communications, called Alexander Graham Bell's nephew from Chicago's Soldier Field using a Motorola DynaTAC handset, referred to as the "Brick" because of its hefty size.

Weighing in at 2.5 pounds, the phone wasn't exactly portable. And it was expensive, retailing for about $3,995. Cell phone service back in those days was also pricey, costing $50 a month just for the service, plus 40 cents a minute at peak hours and 24 cents a minute at off-peak times.

Cell phones in those days were gadgets for the super wealthy. But today, cell phones have become an essential part of our culture. A lot of this has to do with the affordability of the phones and the service plans. Today, cell phones often come free with a two-year service contract and many plans start for as little as $40 a month including free nights and weekends and unlimited long distance and local calling.

The iPhone, which debuted in the summer of 2007, is a game-changer in the cell phone industry in terms of design and user interface.

(Credit: Apple)

But even advanced devices like Apple's iPhone are now selling with a subsidy for $200. This is an amazingly cheap price, considering the advanced functionality of the phone compared to the nearly $4,000 DynaTAC handset sold in the 1980s.

What a difference 25 years makes. In 1984, a year after Ameritech Mobile launched its service, the company had signed up about 12,000 subscribers. Today, AT&T, the largest mobile operator in the U.S. has 72.9 million customers.

As of June, there were about 262.7 million mobile subscribers in the U.S. or about 84 percent of the population, according to the wireless industry association CTIA. Phones have become so pervasive in today's society that nearly half of all children between the ages of 8 and 12 years own cell phones, according to market research firm Nielsen Mobile.

Cell phones have even started making serious headway in replacing old landline phones. Nielsen also recently reported that more than 20 million households in America have cut the cord and are going wireless for their home phone service.

But today's cell phones are more than just home phone replacements. They are also used to take pictures, listen to music, surf the Internet, and send short text messages back and forth. In fact, a recent survey indicates that Americans are now texting more than they are talking on their cell phones. For the second quarter of 2008, U.S. mobile subscribers sent and received on average 357 text messages per month, compared with making and receiving 204 phone calls a month, according to Nielsen.

Of course, text messaging instead of talking seems to be a generational phenomenon with teens making up the bulk of texters. People over age 45 still tend to talk on the phone more than they text.

But services like text messaging and other data services are where carriers expect to make their money going forward. Since wireless operators started selling plans that offering a set number of voice minutes that included local, long distance, and roaming calls, the price of voice has steadily declined.

To help provide more growth for the industry, carriers have invested billions of dollars to build new, faster networks. These 3G wireless networks are what carriers use today to provide the Web surfing, emailing, mobile TV viewing, and music downloading services that some customers enjoy today. So far, these services make up a small percentage of total carrier revenue. But data usage is growing.

New phones like Apple's iPhone are making it easier to surf the Internet. And services that use GPS to help pinpoint subscribers' locations is making data services even more relevant for mobile users. Advertising is even coming to phones to help offset the cost of new services.

The next challenge for wireless operators is building even faster networks to keep up with growing demand for more data services on mobile phones. The next leap in wireless will be to new 4G wireless broadband networks, which operators claim will rival connection rates experienced by some wired DSL services.

Sprint Nextel just launched the first market using its 4G wireless broadband network that uses a technology called WiMax. The first city to get this service is Baltimore. And the company plans to launch the service in other cities such as Chicago and Philadelphia very soon. AT&T and Verizon Wireless, the No.1 and No.2 wireless operators in the U.S., don't expect to roll out a 4G wireless network until at least 2011.

With these new networks on the way and even cooler phones in the pipeline, it's hard to imagine what the next 25 years could bring in wireless.

[ggore]

Ah yes, 25 years and we still do not have cellphone service here, just 72 miles from Oklahoma City, from ANY carrier! This three county RSA was declared to be a dead zone by the FCC when it decreed that AT&T, T-Mobile, US Cellular, Alltell, and Verizon cannot offer service here.

[Lady_Voip]

Well I must say I'm guilty of text messaging more than I talk on the phone, and of having no home phone to supplement my cell. So I guess I'll toast to the 25th birthday of cell phones; we're all so glad you were born.

[chucklasker]

I was thinking about this the other day. The movie Bill & Ted's Excellent Adventure probably makes no sense to kids who have never seen a phone booth. I watched a movie that I didn't think was very old, but in it, the characters had to run to find a phone to call someone. My immediate thought was, where's your cell phone? Cell phones are so ingrained, like the Internet, it's hard to believe we ever existed without them.

[DigitalFrog]

More accurate would be to day that people are texting more frequently than talking. 1 phone conversation can cover what could easily have taken 20 txt messages to deal with, so you can't compare them directly.

[kristofwalker]

I can`t wait to see what will another 25 years bring. however i want to see more <a href="http://www.yodaphone.com/">Cheap Cell Phones</a> on the market with great applications.

[CapBroger]

The story is only correct for the US. The first commercial automatic celullar system in Sweden was opened April 25, 1956, I don't know if it was a WW first. The first (with a questionmark for a Japanese system that might have been earlier) modern cellular system was opened in Saudi Arabia Sept 1, 1981, closely followed by Sweden October 1, Norway November 1, Denmark January 1982 and Finland March 1982. DynaTAC was the first mobile phone that could be called handheld.