The Estimation of Wireless Households: A Local Perspective

12 Pages Posted: 11 Jul 2012

See all articles by Paul Rappoport

Paul Rappoport

Temple University - Department of Economics

James Alleman

University of Colorado at Boulder - College of Engineering and Applied Science

Lester D. Taylor

University of Arizona - Eller College of Management; National Bureau of Economic Research (NBER)

Date Written: August 15, 2007

Abstract

This paper summarizes alternative approaches for estimating the number of households that have dropped their landline connection in favor of a wireless connection. The paper provides a methodology for estimating the number of cord-cutters for local areas. From a national perspective, evidence clearly points to the growing number of “cord cutters.” This trend notwithstanding, there has been little research into the demand for wireless only access. Further, there is limited information on geographic distribution of wireless- only households.

The trend towards cell-only households is important because it impacts a number of regulatory issues ranging from the discussion and measurement of local loop competition to the funding of universal service obligations. Infrastructure planning and investment decisions are also affected by trends in wireless only households. Finally, the number of wireless only households enters any discussion on the demand for triple-play or quad- play services. What are the drivers for the demand for wireless only access? Previous studies have pointed to the value of mobility and the ability to make ‘free’ long-distance calls.

According to the PEW internet Project (2006) another striking impact of mobile technology is that Americans are using their cell phones to shift they way they spend their time. According to the PEW survey, some 41% of cell phone owners say they fill in free time when they are traveling or waiting for someone by making phone calls. And 44% say they wait to make most of their cell calls for the hours when they do not count against their “anytime” minutes in their basic calling plan. Furthermore, when it comes to the features Americans would like to add to their cell phones, the desire for maps tops the charts by a clear margin. Fully 47% of cell owners say they would like this feature and 38% say they would like to have instant messages from select friends sent to their cells. Some 24% of cell owners say they would like to use their phones to conduct searches for services such as movie listings, weather reports, and stock quotes. And a similar 24% of cell owners would like to add email to their mobile-phone functionality.

The growth of wireless telephony with the increasing set of features and capabilities included in wireless services raises a number of issues. The first concerns the nature of intermodal competition and regulation. The second focuses on understanding the demand for telephony services. The study of both issues requires the ability to estimate the size of the wireless-only market. There are national estimates of wireless-only households.

However, we argue that these have limited value since competition is inherently a local issue. National estimates are derived from face-to-face interviews. The expense of this type of data collection limits sample sizes. And theses ample size limitations restrict the ability to project cell-only household penetration rates at local geographies such as counties or telecom geographies such as wire centers. This paper provides a method for estimating wireless-only households that drills down to local geographies.

In Section II we review the literature on wireless substitution. In Section III we present estimates of the number of cell-only households obtained from two national surveys. In Section IV we offer an alternative approach for deriving cell-only households for any geography.

Suggested Citation

Rappoport, Paul and Alleman, James H. and Taylor, Lester D., The Estimation of Wireless Households: A Local Perspective (August 15, 2007). TPRC 2007, Available at SSRN: https://ssrn.com/abstract=2103834

Paul Rappoport (Contact Author)

Temple University - Department of Economics ( email )

Philadelphia, PA 19122
United States

James H. Alleman

University of Colorado at Boulder - College of Engineering and Applied Science ( email )

CO
United States

Lester D. Taylor

University of Arizona - Eller College of Management ( email )

322 Economics Building
Tucson, AZ 85721
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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