As cellular telephone growth far outpaces growth of traditional phones, "bundling" -- the idea of selling combined cable, computer and telephone services -- has become the new telecommunications reality in South Dakota, say regulatory and marketing experts.
Public Utilities Chairman Dusty Johnson says that when it comes to phone service, hard-wired phone lines, commonly referred to as "landlines," still outstrip wireless phones in South Dakota, but cell phones are gaining rapidly. The change in customer habits is being accompanied by a corresponding advance in technology.
PUC research shows that South Dakota now has 750,000 landlines and about 540,000 customers with wireless service.
From 2007 to 2008, there was a 10 percent growth rate in cell phones and only a 2 percent growth rate for hard-wired landlines. Cell phone use appears to make greater gains in an uncertain economy, said Johnson.
"When the economy softened in 2008, landlines increased just 1 percent, while the number of wireless lines increased 6 percent," he said.
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In a state with a population of 800,000, it appears obvious that some South Dakotans are using both services.
About 12 to 15 percent phone users are "cord cutters" who have switched to cell phones exclusively, said Johnson.
Roger Musick, CEO of Mitchell-based Innovative Systems, said his company, which serves more than 800 telephone companies, designs equipment for all segments of the telecommunications industry.
"I would say that the general trend is to go into bundled services," said Musick.
That could mean a single-number service, a telephone that shows caller ID on a TV, or any combination of cable and Internet services.
But whereas it's apparent cell phone use is climbing and outpacing actual landline use, Johnson said that getting a handle on the state's wireless usage has been problematic. Cell phones were deregulated in the mid-90s, so they do not fall under PUC control.
"There's no reliable way to track cell phone numbers," said Johnson.
Cellular companies, Johnson said, are reluctant to part with proprietary information that might place them at a competitive disadvantage.
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Johnson said his office tried to work around that problem by using the fees collected for 911 emergency services to estimate the numer of phone lines.
"For months and months, we worked with county auditors, trying to get these numbers," he said. "We've contacted all the county courthouses in the state."
Assuming telephone revenues are correctly reported, dividing the revenues by the basic 911 fee should have given the PUC the number of lines statewide, he explained. Johnson didn't give details, but he said he wasn't satisfied with the numbers derived using that method.
Final estimates were developed using a combination of federal and county data, "and our own conversations and understandings with companies," Johnson said.
Having a reliable line estimate is helpful from a policy development standpoint, Johnson explained.
"If we see cell phone growth a lot less than we think it should be, or less than in other parts of the country, maybe that tells us we should be doing something from the policy side to see that people have better access to reliable and affordable wireless services."
The PUC would respond similarly to a decline in landlines. Healthy revenues are important to ensure that the telecom infrastructure will be there to serve the needs of consumers and future businesses, he said.
However many cell phones are out there, there are certainly more towers. In the last five years, more than 150 cell towers have gone up across the state, Johnson said.
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"We really view that as one of the big successes of the utility sector in that time," he said.
Nationally, a J.D. Power customer satisfaction study shows that younger phone users are moving away from landlines to cell phones. The survey showed that 30 percent of those between 18 and 24 years old disconnected landlines, compared with only 9 percent of subscribers over 65.
But Johnson said young cell phone users also tend to add landlines as they get older, for security, reliability and communications backup.
It's the integration of all the different methods of communication that's becoming important today, said Musick.
"What used to be a telephone company, in today's world, is a telephone company, an Internet broadband provider and probably a video and wireless provider," he said.
Innovative Systems is creating services that marry all those technologies, he said.
"Landlines, as we traditionally define them, are dropping. At the same time, the number of broadband connections is going up significantly," said Musick. "It's more of a technology change than anything else."
The options available to consumers would boggle minds of technophobes.
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"We'll have service soon that will allow you to look at your TV and see your voice mail," he said. The customer simply clicks on the message he wants to hear and listens to that message over his TV set.
The electronic tether is becoming increasingly seamless, said Musick.
"You as a customer don't really want a land line or a cellular phone," said Musick. "You want a communications system that works. You really don't care about the technology."
Johnson said he couldn't agree more.
"If you don't have a (telecommunications) bundle, you don't have a product that a lot of your customers want," he said.
