FORTUNE -- Back in the 20th century, selling phone calls to Americans seemed a practically perfect business, growing during good times and bad -- and turning AT&T into the nation's most widely held stock. Selling phone calls in the 21st century is proving a much uglier affair.
The market for long distance phone calls was the first to collapse, from a peak of $109 billion in 2000, to less than $50 billion in 2011 (and falling). Next came local phone calls. A third of Americans no longer pay for a landline, and thousands more cut the cord every day. AT&T (T) just reported losing another 3 million home phone lines in the past twelve months, an 11.9% decline.
And now it's cellular phone calls' turn. In the past year the average AT&T wireless customer saw their bill for wireless phone calls fall a whopping 11%. At Verizon (VZ) the drop was 7%.
Until now the telecom industry has been able to console itself with the idea that the billions they used to collect from local and long distance voice weren't really disappearing -- the cash was merely shifting from an old wired network to a new, wireless network.
And until now, that story seemed solid. In the past decade, as local and long distance bills withered, bills for cellular voice have grown at a furious pace. The growth was fertilized by digital technology, which took over from analog phones in 2000 and soon enabled Americans to make ten times as many phone calls. (Cellular usage jumped from 3 billion hours in 2000 to 36 billion hours in 2008.)
The march of digital technology meant that even as consumers paid less and less per minute, the amount they talked always rose at a faster rate. Phone calling revenues more than doubled between 2000 and 2008, from $51 billion to roughly $120 billion.
Now this once elastic market has lost its bounce. Prices are so cheap that people don't want to talk more. Total talk time plateued in 2008, and according to the industry's main lobbying group, Americans actually talked slightly less in the past year than then did the year before, the first ever decline. (Usage came in at total of 2.251 trillion minutes through June of this year, down from 2.257 trillion a year earlier.)
And so these days, as digital advances continue to push prices down, total cellular voice revenues are starting to shrink too.
Fortunately for the big phone companies, the amount they can charge customers for "data" services has so far more than offset the loss in calling revenues. In the last 12 months, data revenue at Verizon rose nearly 20% per user, allowing the average customer's total bill to rise 2.4%. At AT&T data increases meant its core customers who sign up for a contract saw their total bills edge up 1.5%.
The question is, as voice revenues decline, can data continue to fill the gap?
From a technology standpoint, phone calls are rapidly becoming just another app your smartphone can handle. As a result, the industry's ability to charge premium prices for voice calls will inevitably melt away. It's simply a question of how fast. Based on this week's numbers, it seems consumers are turning up the heat.
FORTUNE -- Next time you whip out your iPhone on the sidewalk or the subway, you might first want to glance over your shoulder. Smartphones have become a favorite target of thieves who do what the police call a snatch and grab. One favorite M.O.: The perp grabs a phone and jumps off the train just as the doors are closing. So far this year, over 40% of thefts in MORE
Oct 17, 2011 5:00 AM ET
Verizon's unions face problems that picket lines simply can't fix.
FORTUNE -- The union representing the 45,000 Verizon Communications' (VZ) employees who went on strike yesterday says that the company is using "Wisconsin-style tactics" in an effort "to strip away 50 years of collective bargaining gains for middle class workers and their families." The striking workers also made a point of highlighting the hefty $6 billion in profit they estimate Verizon will make MORE
Scott Woolley - Aug 8, 2011 10:55 AM ET
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* The Wall Street Journal reports that Twitter is looking to raise a new round of private funding that would result an influx of hundreds of millions at a new valuation of $7 billion. The news comes just seven months after the social network raised $200 million at MORE
JP Mangalindan, Writer-Reporter - Jul 6, 2011 3:30 AM ET
The HTC Thunderbolt's Internet speed is not only faster than any other phone, it may be faster than your home wired Internet connection.
Verizon (VZ) launched its LTE 4G wireless service in the U.S. at the end of last year. Until last week however, the only way to tap into that superfast wireless network was to buy a USB dongle and plug it into your laptop.
That all changed with the MORE
Seth Weintraub - Mar 24, 2011 5:08 PM ET
What does AT&T's $39 billion acquisition of T-Mobile USA mean for Sprint? A whole lot of trouble.
Image via Wikipedia
Sprint (S), the third-largest U.S. carrier, has struggled to find its niche for years. It spent billions of dollars building out a WiMAX 4G network that has failed to pay off. It's also battled customer losses (a.k.a. churn in industry lingo) and a reputation for less-than-stellar customer service. Assuming AT&T's (T) MORE
Michal Lev-Ram, writer - Mar 20, 2011 5:56 PM ET
A curated selection of the day's most newsworthy tech stories from all over the Web. Sign up to get the newsletter delivered to you everyday.
The Telegraph reports that Steve Jobs was reportedly blocked from knighthood because the Apple CEO refused an invitation to speak at the Labour Party conference. (Other notable honorary knights include Bill Gates and Apple collaborate-U2 frontman Bono.) The info comes from a former senior Labour Party MORE JP Mangalindan, Writer-Reporter - Mar 2, 2011 5:00 AM ET
In two hours, Apple's smartphone breaks all the carrier's first-day launch sales
Source: Verizon Wireless
That didn't take long.
Verizon (VZ) announced Friday that it had halted pre-sales of Apple's (AAPL) iPhone, having burned through its first shipment in less than a day.
It took only two hours -- from 3 a.m. to 5 a.m. EST Thursday -- for the company to sell more phones than any first-day launch in its history, according MORE
Philip Elmer-DeWitt - Feb 4, 2011 10:14 AM ET
Struggling financier Phil Falcone hopes to build a new $8 billion "4G" network that could speed up wireless service for everyone. Thanks to the big gift of airwaves the FCC just handed him, he might just pull it off.
Image via Wikipedia
Verizon (VZ) and AT&T (T) value their airwave licenses at a stunning $122 billion, so its no wonder they pitched a fit last year when financier Phil Falcone MORE
Scott Woolley - Jan 27, 2011 1:40 PM ET
It's a great ploy to win over new customers, but unlimited data plans will prove problematic for Verizon in the long term.
By this time tomorrow, millions of Americans who have been clamoring for an iPhone without AT&T service will finally have the option: Verizon Wireless is expected to announce the availability of the iPhone running on its network. Not only that, but if reports prove accurate, Verizon will allow iPhone MORE
JP Mangalindan, Writer-Reporter - Jan 10, 2011 2:39 PM ETEvery morning, discover the companies, deals and trends in tech that are moving markets and making headlines. SUBSCRIBE
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| Company | Price | Change | % Change |
|---|---|---|---|
| Bank of America Corp... | 7.95 | -0.16 | -1.97% |
| Microsoft Corp | 31.27 | -0.17 | -0.54% |
| Ford Motor Co | 12.28 | -0.25 | -2.00% |
| General Electric Co | 19.39 | 0.17 | 0.88% |
| Citigroup Inc | 32.36 | -1.00 | -3.00% |
| Index | Last | Change | % Change |
|---|---|---|---|
| Dow | 12,938.67 | -27.02 | -0.21% |
| Nasdaq | 2,933.17 | -15.40 | -0.52% |
| S&P 500 | 1,357.66 | -4.55 | -0.33% |
| Treasuries | 2.00 | -0.04 | -1.96% |
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