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Wireless substitution - more than just voice

Wireless substitution has been a term used to refer to the replacement of wireline telephone service with wireless service. Many people will use their wireless phone to make voice calls even when a wireline phone is at hand. This trend has been going on for some time but has not been particularly disruptive to wireline phone service subscriptions. The real impact is from individuals that rely entirely on wireless service and have no wireline phone service. 

Statistics Canada reported that about 8% of Canadian households had wireless as the only telephone service in the home in 2008. This is up from 5% in 2005.  Another 74% of households had at least one wireless subscriber.

Other surveys indicate that the incidence of wireless only households has continued to grow. IDC Canada reported in June 2009 that 11.6% of Canadian consumers use wireless as their only phone service. By June 2010, another 4% had joined their ranks, bringing the total to 15.6%, according to IDC Canada's latest survey.  This equates to almost 12% wireless only households when adjusted for the proportion of Canadian households with a wireless phone.

The rise in wireless only households has been accompanied by a decline in wireline subscribers. Local wireline connections peaked in Canada in 2006 at 21 million, based on CRTC statistics. Three years later, there were 650,000 fewer wireline connections. Wireless subscriptions now surpass wireline, reaching almost 24 million in 2009.

Source: CRTC, Communications Monitoring Reports

There is evidence that the rate of substitution of wireless over wireline is going to continue to ramp up.  The IDC Canada survey released in June 2010 found that the percentage of Canadians who are thinking about going wireless only is 14% higher in 2010 than in 2009. 

At some point, it may become normal to expect to reach most people via a wireless connection rather than wireline. This point may already be within sight in the United States where one in four households had already switched to wireless only in 2009, according to data published by the Centers for Disease Control and Prevention. An additional 15% of U.S. households relied on their wireless phones for all or almost all of their calls. Combined, 40% of U.S. households fall into the categories of wireless-only or “wireless-mostly”.

Canadian trends in wireless only have tended to track those of the United States with about a three year lag. Canadian wireless only households could reach 25% in 2012, based on patterns in the U.S. 

The proportion of Canadian households expected to be wireless-only is forecast to reach 28% by 2014, according Convergence Consulting Group, as indicated in a chart published in the print version of the Globe and Mail's Report on Business for September 20, 2010 (page B3). 

Is it possible that one-third of Canadian households will be wireless only within the next five years? One major driver is the rapid rate at which wireless services and devices are adding new functionality and therefore becoming more highly valued compared to a wireline service.

Wireless service and devices offer an increasing range of advantages over wireline, far beyond just mobility.  They enable a whole range of communication tools: text/picture/video messages and emails, as well as the ability to stay in contact with social media and access the web on the go. Wireless phone can also be used to watch videos, listen to music and access multitudes of applications including location-based applications.

As more consumers subscribe to wireless services and advanced features, it will spur growth among an ever-widening circle of contacts.  The substitution effect will accelerate further with shifts in the relative prices and further enhancements in wireless devices.

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