February 25, 2004 5:45 PM PST

'Cord-cutting' frays phone revenues

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By 2008, nearly a third of all U.S. wireless subscribers won't have a landline phone in their home, according to a forecast released Wednesday by high-tech market research firm Instat/MDR. That's a dramatic increase in what's known as "cord-cutting."

Instat/MDR also found that cord-cutting is most popular among young adults, one of any industry's most important customer segments.

The arrival in the United States of number portability, or being able to switch from landline to cell phone service providers and still keep the same telephone number, is playing a role in the projected increase, said Clint Wheelock, Instat/MDR director of wireless research.

Aside from portability, Wheelock said, cell phones are now more reliable because wireless carriers have improved their coverage during the past two years, especially in densely populated cities where many of their customers live.

"Cell phones have become a reliable primary phone," Wheelock said.

This is not welcome news for traditional telephone service providers, which have seen a slow erosion of their huge customer bases in the past few years because of cell phone substitution, competition from long-distance providers and Net-based phoning companies.

Most carriers, though, are fighting back by either launching their own wireless phone services, like Qwest Communications International intends to do in the next few days, or by putting more emphasis on their cell phone divisions, as Verizon Communications has over the past two years, Wheelock noted.

"It's a revenue shift rather than a revenue loss," Wheelock said.


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