Wireless services, including cell phones, provide a potential new form of competition to traditional telephone (commonly known as "landline" or "wireline") services. In fact, recent news reports estimate that a small number of U.S. consumers have already cut the cord on their wireline phone.
However, the potential for wireless competition could be at stake for two reasons. One, wireless service is less reliable, and is not held to the same consumer protection standards as wireline phones. Second, co-ownership between wireless and wireline companies reduces the incentive for vigorous competition between the two types of services.
Cutting the Cord has Risks
Wireless service is not comparable to wireline phones, especially when it comes to reliability and access to 911.
It's no wonder — local phone service via wires is subject to minimum service quality and customer protection rules, but similar service over wireless phones is not. A few simple rules would ensure all cell phone providers offer an adequate level of service, and treat consumers fairly and consistently. With the ground rules laid out, companies could then compete by offering better service at better prices.
Similar Billing Hang Ups
Billing problems are similar for wireline and wireless service. The Center for Public Integrity released a report outlining hidden fees on cell phone bills. The National Association of State Utility Consumer Advocates has demanded clear billing on both wireless and wireline phones bills in a petition to the FCC (Word DOC).
When Everyone Owns Everyone Else, There's Not Much Competition Going On
The potential for competition is also undermined by the wireline phone companies' acquisitions of the nation's largest wireless phone companies. For example, Verizon Wireless, the second largest wireless phone company with over 40 million customers, is owned by the same Verizon that provides local phone service to more than 140 million residential and business telephone lines in 29 states.
Cingular, now the nation's largest wireless phone company with about 45 million customers after its takeover of AT&T Wireless, is owned by local telephone giants SBC and Bellsouth. As Consumers Union pointed out, this merger reduced competition, especially affected consumers in California, the South and the Midwest.
Consumers Union opposed the AT&T Wireless and Cingular merger because concentrating more pricing power in the hands of fewer companies that also dominate the local phone market, reduces the incentive for wireless service to provide meaningful competition to their parents — the local phone companies.
If you're thinking about dropping your landline telephone for a wireless phone, our consumer tips can help you consider all the pros and cons of cutting the cord.