Is Telstra Corporation Ltd at risk from this interesting fact?

The decline in landline services will harm Telstra the most.

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According to a report published on CNBC, a U.S. government survey has found that up to four in ten Americans have disconnected their landlines and are now completely reliant on their mobile phones for phone calls. That equates to a 100% increase from just five years ago, when only two in ten Americans were solely reliant on mobile.

America’s situation is slightly different to Australia’s, however parallels can be drawn. The rollout of cable TV across the USA has provided the majority of Americans with a high quality internet connection. The NBN would achieve a similar purpose for Australia. The wide infiltration of cable TV is also one possible explanation as to why the remaining 60% of the US population still have a landline – the connection is part of an internet and cable TV package.

Who loses?

Given the US is often an early adopter of technology, in light of the findings it is interesting to consider the effects of this consumer preference to shed a landline. It would appear Telstra Corporation Ltd (ASX: TLS) which enjoys ‘rivers of gold’ from its entrenched copper landline network could have the most to lose if customers switch to mobile only. Having said that, Telstra very cleverly, and no doubt the previous Labor Government less cleverly, agreed to turn off the old technology copper lines for a fee….a very big fee… so on balance Telstra has protected itself to some degree from what would likely have been structural decline.

Who wins?

Technological change will ultimately force households to make decisions over their telecom needs. This is bad for Telstra as currently the company’s products are effectively the default or ‘lazy’ option for the majority of Australia’s population.

The competitors with arguably the most to gain are smaller, nimble players who have sunk relatively less into fixed assets that are at risk of becoming obsolete.  iiNet Limited (ASX: IIN) and Amcom Telecommunications Limited (ASX: AMM) are two firms which appear to be more nimble and ready  to adjust to changing consumer preferences and a changing operating environment.

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Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.

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