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Cell phones gaining on landlines

The Federal Communications Commission reports Thursday that cell phones have "displaced" nearly a third of all landline calls, and now make up 30 percent of telecom's total revenues.

The landline phone took it on the chin last year from cell phones, according to the Federal Communications Commission (FCC).

An FCC report released Thursday found that nearly a third of the phone calls last year that traditionally would have been placed on a home or office phone were instead made on cell phones. The market phenomenon is known as "displacement."

The FCC also found in its eighth annual competition report that wireless revenues last year were $76 billion, or about 30 percent, of the entire telecommunications sector revenues. Both the displacement and revenue figures are among the highest ever recorded.

The average cell phone subscriber made 427 minutes of calls every month in 2002, a 12-percent increase from 2001, the FCC found. The number of mobile telephone subscribers also rose from 128.5 million to 141.8 million, or nearly half the population of the United States.

The FCC report is another example of how cell phones continue to be a bright spot for the U.S. telephone industry. But their success comes at the expense of traditional landline phone use, which has been generally on the decline.

The rest of the telecommunications industry remains in a three-year tailspin, brought on by intense competition, lower capital spending by businesses and global economic conditions.

"Where all we hear are doom stories about the telecom sector, here we see an extraordinary, important bright spot," FCC Chairman Michael Powell said Thursday. "By any measure one can come up with, the wireless industry story and its value to consumers is an unqualified, if not breathtaking, success."

In general, the FCC report found the cell phone market the most competitive of the entire telecom sector, which includes traditional landlines, broadband and soon television.

Phone lobbyists were quick to cite the finding as proof that the phone industry doesn't need competition-spurring regulations. Powell and FCC Commissioner Michael J. Copps are among those calling for regulations to help increase competition in rural areas, where there are fewer cell phone providers than in cities.

"Year after year, the FCC's competition report serves as a potent reminder that the competitive marketplace delivers the lowest prices," said Tom Wheeler, president of the Cellular Telecommunications and Internet Association, the cell phone industry's biggest lobbyist. "Yet, regulators, Congress and the states refuse to let competition work its magic. Instead the industry faces meddling, mandates and more taxes and fees."