1. Wesley W. Wilson University of Oregon CONSUMER TELECOMMUNICATION CHOICES: EVOLUTION OF CELL PHONES

2.  In the early 1990s, a consumer with a cell phone was rare. Today, it is rare that a consumer does not have a cell phone.  Major Issues:  Are cell phones “killing” landlines?  Are cell phones a substitute or a complement to landlines?  Problem:  Consumers make a telecommunications choice. They can choose to not have a phone, to have a cell phone (only), to have a landline phone (only), or both.  In this research, I use the Consumer Expenditure Survey to model these choices over an extended time period (1993-2010) as a function of individual and household characteristics.  Outline  Background  Model  Data  Results PROBLEM AND PURPOSE

3.  Early mobile phones were a combination of radio and telephone that connected users to the telephone network. Major quality issues – dropped calls, poor sound quality  Major events:  1973: Dr. Martin Cooper made the first mobile call from a handheld device  1983: FCC gave permission for commercial cellular service, and Ameritech entered the market, but very expensive.  1992: First text message sent  2002: 3G network (by 2009 most was using 3G), much faster than 2G systems. Faster internet access. BACKGROUND

4.  1942: Walkie Talkie PICTURES

5.  1942: Walkie Talkie PICTURES

6.  1946: 1 st Commercial Mobile Telephone (Bell) PICTURES

7.  1973 DynaTAC – Martin Cooper Makes First Private mobile call. PICTURES

8.  1983 Motorola DynaTac 1 st public PICTURES

9.  1989: Motorola’s MicroTAC, First Flip Phone PICTURES

10.  1992: Motorola International 3200. First hand size 2G phone. PICTURES

11.  1992: Motorola International 3200. First hand size 2G phone. PICTURES

12.  1999: Nokia 7110 160million sold. PICTURES

13.  2007: iPhone PICTURES

14.  Choice model based on four options:  No phones (cell or land)  Cell phone only  Landline phone only  Both cell and Landline  Explained in terms of a set of individual and household characteristics  Estimated by a multinomial logit MODEL

15.  Consumer Expenditure Series (Collected by BLS)  Quarterly Interview Series-Contains information on individuals and households  Diary Survey-Contains information on expenditures  These data were combined from 1983-2010. The first cellphone expenditure was observed in 1993.  158K observations  18 year time period DATA

16. Table 1: Choices over time YearNoPhoneLandCellBothTotal 19935.2693.040.041.66100 19944.7290.910.064.31100 19956.6787.80.15.43100 19964.9884.720.0710.23100 19974.9382.420.1112.54100 19985.6878.020.216.11100 19995.8674.870.2419.04100 20006.0367.760.5325.69100 20016.2250.811.841.16100 20026.544.933.8844.69100 20037.9144.995.541.6100 20048.2443.367.7840.61100 20057.6838.0710.0544.2100 20068.3433.813.544.36100 20077.5727.7318.2846.42100 20087.8726.7721.2344.12100 20098.0622.7525.5643.64100 20109.0821.0231.738.2100 Overall6.8554.17.8831.17100

17. Type Family Size Real IncomeCollegeMarriedUrbanMaleWhiteAge None1.9320,3800.750.220.920.520.7936 Land2.5035,8250.680.480.910.510.8249 Cell2.2335,5680.870.300.960.530.7835 Both2.8764,0200.910.650.930.510.8347 VARIABLES AND SUMMARY

18.  The model was estimated (using landline only as the base) from 1993-2010  Estimated by year: Most parameters were relatively stable with the exception of year, which followed a trend like pattern roughly comparable to the results with a straight trend.  Estimated over short time periods (1999-2010). But, this misses some of the important parts of the evolution, yet still roughly comparable to the entirety of the data.  Final model as an annual time trend.  Virtually all coefficient are statistically significant  Pseudo R2 is.2428  The model is statistically significant with a chi- square statistic that is very large (83000).  Coefficient estimates do not imply direction of a change in variable in a multinomial logit so marginal are typically presented (and are here as well) ESTIMATION

19. PARAMETER ESTIMATES Option VARIABLESNo PhoneCell onlyBoth fam_size-0.237***-0.160***0.0496*** rinc-1.58e-05***2.11e-06***8.76e-06*** college-0.326***0.136***0.855*** married-0.426***-0.368***0.417*** urban-0.145***0.353***0.0838*** male0.281***0.377***0.0129 white0.02180.03240.0634*** age_ref-0.0532***-0.0725***-0.0105*** year0.191***0.528***0.216*** Constant-380.7***-1,058***-433.6*** Observations158,868

20. MARGINAL EFFECTS Table 4: Marginal Effects No PhoneLandOnlyCellOnlyBoth Variabl edy/dx fam_siz e-0.01730.0045-0.01020.0230 rinc0.0000 college-0.0320-0.1124-0.01530.1597 married-0.0257-0.0382-0.03670.1006 urban-0.0090-0.02870.02560.0121 male0.0128-0.02330.0238-0.0133 white0.0041-0.01400.00020.0096 age_ref-0.00240.0052-0.00430.0015 year0.0025-0.04390.02810.0133

21.  Three different groups are defined and analyzed over time.  Consumer type 1 is a white, male, without a college degree, unmarried, urban, of twenty years old with an income of $7500 and a household size of 1.  Consumer type 2 is a white, male, college degree holder, married, urban, forty-five year old with an income of $86,000, and a household of four people.  Consumer type 3 is a white, female, college degree holder, unmarried, 75 year olds, with an income of $19,000  Two different years are used (defined) to compare age differences in choices. CONSUMER GROUPS

22. TRENDS

26. SYNOPSIS  Research points to tremendous differences over time in telecommunication decisions of consumers.  In 1993, virtually no cell phones in the data  In 2010, most have cell phones.  Major findings:  Land line phones have followed a secular decline over all time periods  Cell phone only and individuals with both a cell and land are growing  Land lines are falling but primarily for younger people.  Other:  If family sizes grow, more likely to have a landline or both cell and landline, and less likely not to have no phone or cell phones only.  More education leads consumers to choose to have both cell and land line phones  Married people tend to have both a landline and cell phone.