U.S. Consumer Preferences for Telephone and Internet Services

Evidence from the RAND American Life Panel

by Craig Bond, Howard J. Shatz

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Research Questions

  1. What proportion of U.S. households have fixed telephone service, mobile telephone service, fixed Internet service, and mobile Internet service?
  2. How do U.S. households rank the importance of these services?
  3. How do these service choices and preferences vary across the population?

Because telecommunications services use large network infrastructures that create barriers to entry and are associated with public goods, including safety, these services have typically been regulated at the state and federal levels. However, as new technologies emerge and the population responds, adopts, and adjusts, historical regulatory strategies may no longer be appropriate. Efficient policy requires an understanding of the preferences of consumers for the services provided by telecommunications firms and the benefits and costs created by any change in regulatory policy.

This report uses data collected from a representative survey of the revealed and stated preferences related to fixed telephone (landline), mobile telephone, fixed Internet, and mobile Internet services. It provides population-level estimates of participation in free and reduced-price telephone programs provided by the government, the bundles of services found in U.S. households, and the relative importance of each service in the lives of the respondents. Results show that about 90 percent of households have at least one mobile phone, 75 percent have fixed Internet service, 58 percent have mobile Internet service, and 49 percent have fixed telephone service. Mobile telephone service is most important to the average respondent, followed by fixed Internet service, mobile Internet service, and fixed telephone service, although a portion rank fixed telephone first. Using a method known as best-worst analysis, the authors estimate that mobile telephone service is approximately 3.5 times more important than fixed telephone service for the average consumer. Continued investigation of population preferences for various telecommunications services is warranted to estimate the effects of any potential policy changes.

Key Findings

The Authors Analyzed Data from a Three-Question Survey of an Internet-Based Sample of the U.S. Population

  • Approximately 90 percent of households have at least one mobile phone, 75 percent have fixed Internet service, 58 percent have mobile Internet service, and 49 percent have fixed telephone service. Approximately 8 percent of Americans participate in a reduced-price telephone program, such as the Lifeline program overseen by the FCC. Only 2 percent have none of the four services, while 93 percent have some form of telephone service, and 85 percent have some form of Internet service.
  • Among those who have phones, about 48 percent are mobile only, 48 percent have both mobile and fixed telephone services, and the remainder (4 percent) have fixed phones only. Mobile phones thus appear to substitute for fixed telephone service for about half of the population. It is more likely for a household to have fixed telephone service for respondents who are older, female, wealthier, more highly educated, and who identify as Black/African American, all else equal.
  • The authors identified four classes of preferences across the population. Two of the four classes (66 percent of the population) view mobile telephone service as most important and fixed telephone service as least important, while a third class (14 percent of the population) prioritizes Internet and mobile telephone service over fixed telephone service. The remaining class, approximately 20 percent of the population, views fixed telephone service as the most important (with mobile phones second). However, this group (which tends to be older, is less likely to be employed, and has lower incomes) still has a mobile phone adoption rate similar to the classes that prioritize mobile phones.

Table of Contents

  • Chapter One

    Introduction

  • Chapter Two

    Data and Summary Statistics

  • Chapter Three

    Revealed Preferences for Telecommunications Services

  • Chapter Four

    Stated Preferences for Telecommunications Services

  • Chapter Five

    Conclusion

  • Appendix A

    Unrestricted Regression Results

  • Appendix B

    Best-Worst Scaling and Related Statistical Models

This research was sponsored by the Federal Communications Commission (FCC) and conducted in the RAND Science, Technology and Policy Program, a part of RAND Justice, Infrastructure, and Environment.

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