The telecommunications industry, in every respect, has grown vastly over the past two decades. Advances in fiber optics, wireless and other signal-processing technologies have created new markets and made new network infrastructure far more affordable, increasing competition.
In recent years, wireless telephony has presented the greatest competitive challenge to wireline service. Cellular subscriptions have increased from just 92,000 nationwide in 1984 to more than 158 million today. The number of local wire lines, meanwhile, decreased by nearly 2 million between 1999 and 2002.
Competition yields lower rates and promotes higher usage. For example, the number of wireless call minutes increased 61 percent between 2000 and 2002. The biggest market growth is now among lower-income customers, reflecting the increased affordability of service.
A major factor driving the extraordinary growth in wireless services has been the loosening of government’s grip on the broadcast spectrum. In the early 1990s, the FCC had restricted the number of wireless carriers to two per market area. See Chart 5. The 1993 Budget Reconciliation Act, however, forced the FCC to auction spectrum for up to six carriers per market. Consequently, by 2003 more than 95 percent of the nation was served by at least three wireless services.
This growth results from wireless carriers competing in the open market to build their own networks, with none of the regulatory management or subsidization that has characterized wireline competition.
Cable television companies and Internet Service Providers (ISPs) increasingly are adding telephony to their offerings. See Chart 6. Cable telephony now serves 2.5 million residential subscribers, an increase of 70 percent annually since 2001.
Voice Over Internet Protocol, or VOIP, will have experienced a compound annual growth rate of 96.7 percent between 2000 and 2007, according to calculations by the consulting firm of Frost & Sullivan. The firm also forecasts that by 2007, over 60 percent of long-distance traffic will travel over VOIP networks.
High-speed telecommunications services, in particular, have experienced tremendous growth, as illustrated by the chart above. An estimated 83 percent of U.S. homes now have access to cable or DSL broadband, while some 59 percent of Americans access the Internet from home or work — a number projected to increase to 73 percent by 2007.
Advances in technology have allowed voice, video and data services to be combined in new applications. This “convergence” is increasingly available across all types of telecommunications media.