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Timothy B. Lee

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Posted at 12:09 PM ET, 09/14/2011

Wireless stays, cable TV goes as poverty problem weighs on household budgets: analysts


A staff member displays a Nokia N9 smartphone at a news conference in Espoo, June 21, 2011. (LEHTIKUVA - REUTERS)
With more Americans living in poverty and a stubborn jobs problem causing people to tighten purse strings, they are also rethinking what they spend on telecom and media.

What they are least willing to give up is cell phone service — now viewed as essential, analysts say. And everything — cable, satellite and broadband wireline Internet could be cut as families struggle with finances, those experts say.

A mobile voice plan is cheap, and data plans can be less expensive than cable and DSL service, when considering equipment costs on top of service.

These trends represent a shift for consumers and add to growing uncertainty over the prospects for cable and satellite television firms.

“In the past, the last service to go was TV. The standard line was that people would rather shut off their refrigerator than their television set,” said Craig Moffett, an analyst at Sanford C. Bernstein. “Now, wireless is probably the service at the top of every list. And after that, it’s becoming a real horse race between video and broadband.”

That makes oversight of wireless billing even more important, consumer advocates say.

As more users rely on cell phones (Pew reported that some smartphone users are cutting cord on wireline Internet), they are also being pushed into new tiered data plans.

“Broadband is only becoming more and more important, and, for many, they are getting access through mobile devices,” said Parul Desai, a policy counsel at Consumers Union, the publisher of Consumer Reports. “Greater protections by the FCC is therefore also important.”

But wireless consumers are becoming more frugal in their spending on plans. Many are choosing to pare down their monthly bills by downgrade voice and texting plans, said Roger Entner, an independent telecom analyst.

Cheaper prepaid cell plans have become more popular. According to The Wall Street Journal, Verizon Wireless plans to introduce a $50 pre-paid voice, data and texting plan to compete with competitors such as Metro PCS.

But it can be harder to trim down cable costs in the same way, experts say.

“The difference between a starter package and the high end flagship isn’t that big, and that’s becoming a real problem for the low end,” said Moffett.

Cable customers are gaining broadband subscribers, but they are losing paid television subscribers — a consistent trend over the past couple years.

Time Warner Cable lost 128,000 television subscribers in the second quarter. Comcast saw 238,000 basic cable users leave its service during the second quarter.

Related:

As cable, telecom industries evolve, Netflix a big threat

Going wireless all the way to the Web

Wireless data plans put spotlight on FCC enforcement

By  |  12:09 PM ET, 09/14/2011

 
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