As consumers cut spending, they'll take a close look at Internet access, pay-TV and phone services, says Thomas Wehmeier, an analyst at U.K.-based research firm Informa. People with both landline and wireless phones might decide that they can get by with only one, he says.
"In the end, there may be a flight toward mobile-only," he said.
One reason the wireless-only option is attractive, analysts say, is that consumers can buy cell phone minutes as they need them, using prepaid rate plans. Prepaid plans let consumers reduce spending without depriving themselves of phone services.
Flat-rate plans that offer unlimited calling are also driving wireless substitution, analysts say. Regional firms Leap Wireless LEAP and MetroPCS PCS sell flat-rate plans for around $50 monthly.
The plans target low-income and youth customers. Leap and MetroPCS don't require customers to sign contracts and don't perform credit checks.
The nation's two biggest wireless firms, AT&T T and Verizon Wireless, sell unlimited plans starting at just under $100. But the wireless trend is a negative for landline leaders AT&T and Verizon Communications VZ, which with the U.K.'s Vodafone VOD owns Verizon Wireless. The landline business has always been a cash cow for the old Bells because there is little competition. While they've both put a lot of emphasis on wireless, they face much more competition in that business and more risk of churn, or losing customers to rival services.
Also, analysts say that Sprint Nextel S and T-Mobile USA, which also have national networks, might roll out cheaper unlimited plans, because they're losing market share to AT&T and Verizon.
Wireless calling prices are expected to continue falling as subscriber growth slows and competition heats up.
U.S. wireless firms added 3.8 million net new subscribers in the quarter ended Sept. 30, down 15% from the 4.5 million added a year earlier.
UBS estimates that U.S. wireless firms will add 15.5 million new subscribers in 2008, down 31% from last year. It forecasts that only 10.6 million new subscribers will be added in 2009, but consumers like the options afforded by the many wireless plans.
"In the past, wireline phone service was the only game in town," said Craig Moffett, an analyst at Bernstein Research. "People could no more disconnect their wired phone than they could disconnect their refrigerator. Today, cable operators offer a cheaper alternative, and cutting the cord and going wireless-only is a viable option."
New products that improve cell phone service in homes could contribute to the shift to wireless-only, says Bonny Joy, an analyst at Strategy Analytics.
T-Mobile USA and Sprint offer cell phones that link to high-speed Internet connections via wireless routers in homes. People still need broadband hook-ups, but they can disconnect standard phones, Joy says.
Analysts say the shift to wireless-only services is partly due to demographics. As the under-30 population ages, they're likely to stick with wireless-only service if they have it already. Studies show that older consumers are more likely to switch to wireless-only service after they've had wireless phones for a few years.
In a report, Morgan Stanley analyst Simon Flannery says 32% of U.S. households will have wireless-only services by 2012, up from 19% this year. "Economic pressures are combining with new pricing and product offerings to drive wireless substitution," Flannery wrote.
A National Center for Health Statistics survey says almost 14% of U.S. households were wireless-only at the end of 2007, up from just 5% four years earlier.