I’ve come across a variety of statistics recently from various surveys about communication preferences, and was tempted each time to do a post. Instead, I’m doing one post on all of them, which should allow for some bigger-picture thinking. In essence, the conclusion you naturally come to when reading these articles is that landline telcos are in for a nasty period of rapid decline in their core business thanks to the communication preferences of the rising generation. But there are things they can do to manage and slow this decline and remain relevant.

The first couple of articles concern the trend for greater use of mobile devices and the decline in the number of landlines:

• One in Six Use Only Cell Phones at Home (AP / Discovery Channel)
  
• Number of landline-free households up 10% in US (Ars Technica)
  

The second set concerns the communication preferences of younger people (often described as Millennials):

• Gmail Preferred By Students, But Nothing Beats Texting (ReadWriteWeb)
  
• Email vs. Texting (EMarketer.com via LDS Media Talk blog)
  

Both sets of articles, though, are really about the changing communication preferences of the population as a whole, and the impact of that younger group in particular. Those currently aged 15-25 are growing up with a radically different set of communication behaviors and preferences from those embraced by even 25-35 year olds, let alone the older generations. And this will have a massive impact on the landline telcos around the world, which don’t really feature in this picture at all. As the rising generation makes up an ever greater proportion of the total population this impact will only increase.

Mobile substitution happening from the bottom up

First, the increased use of mobile devices and abandonment of landlines. I remember talking to Gavin Patterson, then head of the consumer retail bit of BT, about six or seven years ago, about the challenge of driving growth in his business, and he told me his worst nightmare was a generation of kids growing up never having a relationship with BT. Sadly for him, and other landline telcos around the world, the nightmare is now reality. The CDC survey both articles are based on tells us that 17.5% of households have no landline but do have wireless phones. However, the most striking statistic for me is this one:

Nearly two-thirds of all adults living only with unrelated adult roommates (63.1%) were in households with only wireless telephones. This is the highest prevalence rate among the population subgroups examined.

You’d better believe that that’s mostly college students and those recently graduated from college and still living with roommates, almost all in the 18-25 category. Here’s more detail on the age split overall:

More than one in three adults aged 25-29 years (35.7%) lived in households with only wireless telephones. Approximately 31% of adults aged 18-24 years lived in households with only wireless telephones.

Remember that a good chunk of 18-24 year olds live with their parents and thus technically have landlines in the home even if they don’t ever use them. The question is whether these people will ever return to the habits of their parents as they get older, settle down and have kids of their own. There’s not that much evidence yet to suggest that they will, and there’s not much incentive to either. It used to be that a landline from the phone company was necessary to get broadband but since ‘naked DSL’ is now widely available and cable competitors offer TV/broadband packages without voice that’s no longer the case.

The next question is whether these future households will have landline connections at all - with the increasing availability of 3G and impending availability of 4G wireless options for web access and an increasing preference for web-delivered rather than broadcast/linear video content, I’d question whether these households will need a wireline connection - from a telco or a cable company - at all.

Voice isn’t even a communication option for most young people

Of course, all this assumes that voice is still one of the main modes of communication for young people, but the second set of articles suggests this isn’t the case either. The ReadWriteWeb article cites an eROI study on the communication preferences of high school and college students and includes this chart from the survey:

One caveat: the survey seems to have asked about online communications specifically, but from other surveys I’ve seen and personal experience with teenagers voice would barely make a blip on charts like this even if it was included. But the other key thing is that email - so newfangled when it first entered most people’s lives in the mid- to late-90s - is becoming distinctly passé. Text messaging already enjoys a much higher use rate, and both the combined social networking categories and the combined IM categories in the chart above already add up to the same as email (26%). IM seems to be on the decline with the exception of social networking IM but texting and social networking are now the major components of online communication for most young people. And none of those services is provided by a telco either. Wireless telcos have the best opportunity for capturing some of this spend by creating easy-to-use and low-cost wireless options for using these things on mobile devices, but landline telcos risk being entirely marginalized.

It’s grim reading, all of this, if you’re a landline telco or someone who works with them. Is there anything they can do? Yes, absolutely. They should immediately begin (if they haven’t already) building partnerships with social networks and other online providers to ensure that the necessary interfaces are in place to allow telco services to be linked in to those environments. BT’s acquisition of Ribbit is a great example of an innovative approach to tying online and landline worlds together, and Telecom Italia has also done clever things with Facebook, allowing customers to make calls from within the Facebook site, for example.

Telcos need to offer deep integration both ways between their systems and these online service providers’ systems to allow address book sharing, easy initiation of old-fashioned phone calls and other methods of telco-based communication from within websites and otherwise make the linkages between the two worlds as clear and easy as possible. Telcos have no hope of creating standalone offerings for young people that will generate any kind of real interest, but partnering with the sites where those young people already spend their time is the next best thing. Allow those companies to innovate, and offer them things they can’t easily do as an incentive to partner.

All is not lost - yet. But it’s certainly heading in that direction, and only innovative telcos willing to really rethink the way they engage with teenagers and young adults will have any chance of staving off the steep decline that seems to be on the cards.

There’s an interesting article on Generation Y and how it will change the web on the website ReadWriteWeb. It raises a number of important issues about Generation Y, but the most striking thing to me was this paragraph, on Generation Y’s attitude to work:

Work Isn’t Their Whole World: Sure, they’re going to go to work, but it had better be fun. For Gen Y, work isn’t their identity. It’s just a place. Gen Y sees no reason why a company can’t be more accommodating, offering benefits like the ability to work from anywhere, flex-time, a culture that supports team communication, and a “fun” work environment. They’re also not going to blindly follow orders just because you’re the boss. Sometimes dubbed “Generation Why?” they need to “buy in” as to why something is being done. Old school bosses may find their questioning insubordinate behavior, but they would be best to just change their management techniques and adapt. Gen Y hasn’t known much unemployment and they’re not going to put up with being treated poorly just for sake of a paycheck. (Bosses, your survival guide is here).

I’ve seen similar remarks made about Generation Y in the context of the tools this generation will use in the workplace. Instant messaging, text messaging, social networking and other technologies, and not email or phone calls, are the way this generation prefers to communicate, but the most controversial assertion for me, which is repeated in the excerpt above, is this idea that companies, and not these junior employees, are the ones that will need to change.

When the rest of us older folk (relatively speaking) arrived in the workplace, we were handed the tools we needed to do our jobs, which likely included a desktop PC with email and (depending on how much older we are) Internet access, and a deskphone, and told where the stationery cupboard was. We didn’t expect to use our personal tools in the workplace, and absolutely expected to conform to what our employers told us and not what we thought we should do. Why should this generation be so different?

The negative reason seems to be that this generation might also be called Generation Spoiled. Parents, teachers and others have bought into the ethic that there’s no wrong answer, that children need always to be nurtured and given positive feedback and not criticism, and so on. I worry that this attitude to giving Generation Y what it wants in the workplace is a continuation of the spoiling of this generation, and that they’re going to go through life with a sense of entitlement as a result. Will they in turn pass on that same attitude to the next generation (Generation Z?) ?

There are two better reasons for this attitude. The first is that, in order to attract the best and brightest among this generation, companies feel they have to offer the most flexible and congenial working environment possible. To an extent, this actually makes a lot of sense, since they will be actively competing with other employers for those employees, who will choose their first employer partly on the basis of their perceived enlightenment on these matters. In practical terms of course, the companies which are most attractive to these candidates probably already have practices which meet these criteria - think Google, Yahoo! and others.

The second reason is that this trend is part of a much bigger shift in power and in the flow of technology. In the past, including when most of Generation X joined the workforce, new technologies were often experienced in the workplace, whether fast computers, Internet access (and then broadband), mobile phones, email, and so on. However, many of the more recently available technologies have been experienced first in personal life - instant messaging, even faster Internet access, social networking, mobile messaging, video calling and so on. Because this is a much wider shift, although Generation Y may be the first to have grown up in it, all subsequent generations will bring the same experience with them, dragging their personal tools into the workplace because their personal lives are where the innovation is taking place now. We might call this a “c2b” trend, reflecting the fact that technologies are moving from consumers to business rather than the b2c model we’re more accustomed to.

Most of what I’ve said in these previous two paragraphs applies more narrowly to the technology tools Generation Y will expect to use and not as broadly to their attitude to work in general, which still strikes me as more spoiled than enlightened. I think there are some good reasons for empowering these younger employees to use the tools they will work with most effectively, but I’m not convinced that we need to mollycoddle them. In a time of small or even negative economic growth, it seems to me that these employees need jobs at least as much as employers need bodies, and they should be treated accordingly.

I came across two different articles / blog posts today that discussed the decline but also the staying power of legacy services. The first is a blog entry by David Pogue of the New York Times about dial-up. Here’s an excerpt:

From the mailbag:

Dear Mr. Pogue: Can you explain why big sites like Adobe and Microsoft list download times for 56k modems?

I can’t image that 56k modems are used by the majority of U.S. Internet users (or even in the Western world, really). Wouldn’t it make more sense to tell us what the download time would be for a DSL or cable connection (various speeds)?

I believe my reader is correct: dial-up modems now represent well under half of U.S. Internet users.

Do Web sites list dial-up download times on the premise that dial-up users are the only ones who care how long it will take?

My guess in answer to this question, incidentally, is that probably no-one is responsible for reviewing that policy from time to time to see if it still makes sense. It’s probably apathy as much as anything else that’s keeping those download times in place.

The second is a Wall Street Journal column about landlines. Again, an excerpt:

In last week’s Real Time column about cellphones, I wrote that “a call on my landline is almost certainly a wrong number, a charity or a recording of a politician.” Which led one reader to ask a very reasonable question: Why keep the landline?

The answer, unfortunately, involves throwing my wife under the bus: She’s the one who wants to keep it. But her reasons are pretty good: She notes that our cellphones aren’t charged “half the time,” which I’d dispute specifically but not generally; we have a good phone number that’s easy to remember and to dial; and we’re listed in the directory, without which there’d be no way for people who’ve lost track of us to find us. When I said people would just Google us, she said “I’m an old fogey, what do you want?” which is a kinder version of “Shut up, dear.”

Let the record show that my wife is in no way an old fogey. But the record also shows that the tide — at least in the U.S. — is running against her. A report released last week (see the PDF here) by the Center for Disease Control and Prevention paints a picture of a rapidly vanishing landline business. In the last six months of 2007, at least 15.8% of U.S. households had at least one wireless phone but no landline, and 14.5% of adults — 26 million — lived in a household with only wireless phones. (The CDC’s first such survey, conducted in the first half of 2003, found 2.9% of adults living in wireless-only households.)Throw in the 2.2% of households that had neither wireless or landline phones and 18% of U.S. households are without the traditional phone service that was part of our common culture for generations. Landline phone penetration is now what it was in the early 1960s.

The point is that both of these articles are about technologies in decline. In the case of dial-up, of course, it’s a much newer technology that is nonetheless much further along in the decline - only a small minority still have dial-up Internet connections, whereas landline owners are still by far in the majority. But in both cases, those technologies are going to reach the point where networks and services are being preserved for a smaller and smaller number of customers. At some point, the providers of those services will have to flip the switch on those services to “off”.

They’re not the only such services, and it’s a tricky thing to grapple with. We’ve recently seen the switch-off of AT&T’s TDMA network, and in early 2009 we’ll see the shutoff of the analog TV network. Sprint has caused some problems for itself by providing an off date for its legacy business networks, giving its competition some easy ammunition. At some point, all companies will reach the point where the cost of maintaining these networks for the laggards is outweighed by the benefits of forcing a switch, but the trick is always calling that point accurately. And the downside is getting it wrong and causing a huge customer service and/or sales problem. Luckily, landlines are going to be around for quite some time, but that dial-up market is going to be heading for the chop rather sooner. When does AOL flip the switch on that?