If Wireless-Only Phone Service Is the Future, Where Does That Leave Broadband?

If my 75-year-old parents, who live in a typical single-family home in the suburbs of Anaheim, have the audacity to cancel their fixed line telephone service—relying only on their cell phones for communication—who’s next? Or who’s not next?

Cellular-only phone service has become a trend in the U.S. According to Pew Research studies, U.S. home broadband connections declined from 70 percent in 2013 to 67 percent in 2015 as more Americans turned to mobile wireless connections. During the same period, smartphone ownership increased to 68 percent.

This is not a migration that is expected to end any time soon.In fact, a new Park Associates report predicts that 8 percent of U.S. broadband households plan to cancel fixed line telephone service over the next 12 months.

What does this mean for broadband in the home in general—for Internet and/or TV? Will consumers cancel fixed broadband for these services as well, opting for wireless or mobile data services instead?

The Part Associates report speculates that 10 percent of U.S. broadband households are likely to do just that during the next 12 months.

Reasons given are the improved mobile capabilities of smartphones, and the reintroduction by mobile carriers of unlimited data plans. Broadband cord-cutters may also be motivated by new value-added mobile services, including T-Mobile’s zero-rated HD video streaming, AT&T’s zero-rated DirecTV Now service and Verizon’s Go90 video service, among others.

This is a development that should concern cable operators. Case in point, a Point Topic study shows that the number of U.S. fixed broadband subscribers dropped by nearly 200,000 on a net basis in 2Q16, a decline of 0.2 percent.

In contrast with the U.S., some 7.6 million fixed broadband connections were added in China in 2Q16, a year-over-year rise of more than 3 percent, according to Point Topic. Other major broadband markets also experienced what Point Topic deems healthy growth of fixed connections: A net 466 thousand were added in Japan, for example. The research company gave credit for the increase mainly to new fiber-to-the-home (FTTH) subscriptions.

It is safe to say that, to a large extent, voice has moved to mobile networks and that people are also using their mobile for short clips of entertainment, such as YouTube, Facebook and music, and, in general, quick shots of Internet-based video browsing and video messaging.

In most developed economies, however, where both levels of infrastructure are available, very few people depend solely on mobile networks for their Internet connections. Americans still get most of their direct Internet consumption from fixed cable lines.

For one thing, the cost to use full video services over mobile networks is prohibitive. If unlimited bandwidth capacity were made available over these mobile networks, things might be different, but the history of mobile networks indicates that this is not likely.

What’s more, limitations in relation to spectrum use make it almost impossible to ramp up mobile networks in such a way that they would be able to compete in a commercially viable way with the broadband access capacity that is available over fixed networks. Where both levels of infrastructure are available, competition will likely be limited to overlap for certain services.

In most situations, fixed and wireless services will complement, rather than compete, with each other.