GARTNER DATAQUEST SURVEY SHOWS U.S. HOUSEHOLDS DISCONNECTING EXTRA PHONE LINE FOR OTHER TELECOM MODALITIES.

Some U.S. households are getting rid of their additional phone line, but this isn't necessarily bad news for the telecommunications industry, as many of these households are purchasing alternative, feature-rich and higher-priced forms of communication equipment, according to survey results by Dataquest Inc., a unit of Gartner, Inc. (NYSE: IT and ITB).

A Gartner Dataquest survey from June showed that since January of this year, nearly 6 percent of all U.S. households had replaced a traditional telephony access line with alternative communications modalities.

"A significant segment of the additional residence lines were never used for voice communications but rather for dial-up Internet access and faxing, so they were a natural market for upward migration to newly available and affordable forms of data communications," said Peggy Schoener, senior analyst for Gartner Dataquest's Telecommunications and Networking group. "Additionally, the increasing mobile nature of society together with competitively priced, technologically viable wireless offerings have diminished the requirement for multiple wired access lines for voice communications."

The survey reported that of all residence access lines replaced since January, 55 percent migrated to high-speed broadband access. The impact of the migration of almost 4 million dial-up lines to higher-priced broadband Internet access has significant revenue implications for those service providers capturing the broadband customer. The majority (70 percent) of these voice lines replaced by broadband migrated to one of the incumbent local exchange carrier (ILEC) high-speed residential services.

With DSL the most popular migration choice, Gartner Dataquest analysts state that the ILECs are capturing a significant portion of the displaced voice access lines. For other market players offering competitive services (such as cable companies, wireless companies and high-speed access providers) the ILEC losses are their gains.

The presence of wireless phones in U.S. households has reached a critical mass and continues to grow. Gartner Dataquest's June survey reports that 64.3 million households have at least one wireless phone available to the household. This represents nearly 61 percent of all households, increasing from 50 percent reported 16 months earlier. Of all households reporting residence access line replacement over the past six months, 2.3 million or 33 percent of lines were replaced with a cellular/PCS phone.

"The attractive per-minute bundled pricing plans, free minutes and other promotions offered by the highly competitive wireless industry have made wireless calling prices competitive with, and in some cases better than, wireline calling rates," Schoener said. "Add the attractiveness of the mobility factor to pricing considerations, and household voice communications contention among family members is being solved by wireless as opposed to wireline calling.

Additional information is available in the Gartner Dataquest Focus Report "U.S Residential Wireline Voice Access Lines Head South, Revenue Heads North." This report examines the trend of replacing a traditional telephony access line with alternative communications modalities and the near-term and long-term implications to the telecommunications industry. [sections]