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In the U.S. in the first half of 2009,  22.7% of households had only wireless telephones. Another 14.7% of households received all or almost all calls on a wireless phone.  The share of wireless-only households has increased 2.5 percentage points in only six months.[1]

More rapid shift to wireless telephony among younger persons isn't surprising.   Among persons ages 25-29, a total of 64% lived in wireless-only or wireless-mostly households in the first half of 2009.  Young persons do not want a shared phone.  They are unlikely to shift back to a shared (wireline) phone as they get older.

Large differences in the share of wireless households across states are more difficult to understand.  Some impressive statistical work constructed state-level estimates for wireless households in 2007.   This work found "great variation in the prevalence of wireless-only households across states ... ranging from a low of 5.1% in Vermont to a high of 26.2% in Oklahoma."[2]

Differences in state demographics, household characteristics, and wireless subscribership per capita apparently don't explain considerable variation across states.  A logistic regression of wireless-only/wireline-phone-present households controlled for age, sex, race/ethnicity, household poverty status, home ownership status, other demographics, and state-level wireless subscribership per capita.[3]  State-level wireless subscribership per capita was identified by its variation across 2007 within states.   Within this regression, state fixed effects vary considerably.  For example, Texas had a 16 percent point higher wireless-only household share than California would have at Texas' levels of the control variables.[4]   Wireless telephony is not regulated at the state level, but wireline telephony has been regulated at the state level since its beginnings.  Perhaps some of the state-level variation in wireless-only households reflects state-level variation in wireline-phone offerings.

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Data: U.S. state-level data on wireless-only household, wireless subscribers, and households with wireline or wireless telephone service (Excel version).

Notes:

[1] Blumberg SJ, Luke JV. Wireless substitution: Early release of estimates from the National Health Interview Survey, January-June 2009. National Center for Health Statistics. December 2009. Available from: http://www.cdc.gov/nchs/nhis.htm

[2] Blumberg SJ, Luke JV, Davidson G, Davern ME, Yu T, Soderberg K. Wireless substitution: State-level estimates from the National Health Interview Survey, January-December 2007. National health statistics report; no 14. Hyattsville, MD: National Center for Health Statistics. 2009, p. 2.

[3] Id., Table II.

[4] For my calculation of the significance of the state fixed effects, see the state factor worksheet.

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In her interesting new book, From Iron Fist to Invisible Hand: the Uneven Path of Telecommunications Reform in China, Irene S. Wu describes competition among bureaucracies, consumer demand, and technological innovations as drivers of telecommunications reform in China.   An interesting case study is Little Smart, a low-cost, limited-mobility wireless service that rapidly gained popularity, but which will be shut down by 2011 in favor of 3G services.

Little Smart provided a vehicle for China Telecom to offer wireless service.  Little Smart was initially approved to extend China Telecom's wireline telephone service to rural areas.   However, Little Smart was first offered commercially in December, 1998, in Zhaoqing, a small city in Guangdong Province.  In 1999, Little Smart service was extended to two provincial capitals and other small cities.   By September, 2001, Little Smart was being offered in 300 cities and had about 5 million subscribers.   By early 2003, Little Smart was available in Beijing and other large Chinese cities.  The number of Little Smart subscribers reached 91 million in 2006.[1]

Efforts of mobile-service competitors and the Ministry of Information Industry (MII) to constrain Little Smart subscriber growth failed.   Mobile-service competitors China Mobile and Unicom complained vociferiously to state bodies that Little Smart was not authorized to provide the service it was providing.  MII repeatedly forbade Little Smart to expand service, but it did anyway.  MII subsequently ratified Little Smart expansions.   Little Smart succeeded in gaining state approval by first succeeding in gaining a large number of customers.

Little Smart grew rapidly as a relatively low-quality, low-cost service.  Its early nicknames indicated its low quality:

Weiwei ko (Hello-Hello Call, because users are always saying hello-hello), Shikengtong (Toilet Connection, to indicate the very low standard of service), and, in the city of Zhaoqing,
Duanzhousai (Duanzhou Disconnection) [its brand name there was Duanzhoutong (Duanzhou Connection)].[2]

Little Smart, however, was much cheaper than China Mobile and Unicom.  Its monthly fee and per minute rate were about half of these competitors' rates.  In some places Little Smart offered flat-rate, unlimited calling.  In all locations Little Smart users did not have to pay for incoming calls, as did subscribers to the other mobile services.

The challenge of shutting down Little Smart has now shifted to China Telecom and China Netcom.  China Netcom was formed in 2002 from the northern 30% of China Telecom's wireline network, plus the assets of the competing companies Netcom and Jitong.   Thus China Netcom inherited Little Smart subscribers through its descent from China Telecom.  Both China Telecom and China Netcom received 3G mobile licenses in 2008.   They have stopped investing in Little Smart and instead are focusing on building out 3G services.  But at the end of 2008, they still had a total of about 70 million Little Smart subscribers (that's equivalent to about 7% of the Chinese population ages 15-64).

The U.S. DTV transition is an example of a centralized, state-led shutdown of an old technology, over-the-air analog television broadcasting.  As of 2005, about 15 million U.S. household received only over-the-air television (about 14% of households).[3]   The U.S. government established February 17, 2009, as the date at which full-power TV stations would cease analog broadcasts. The U.S. Congress provided $1.5 billion for the transition, mostly to subsidize purchases of set-top converter boxes. The transition date was subsequently shifted to June 12, 2009, and an additional $650 million was provided for converter box coupons and related transition activities. Managing the shutdown of over-the-air analog television service has been a top priority for the main U.S. government telecommunications agencies, the National Telecommunications and Information Administration (NTIA) and the Federal Communications Commission (FCC).

Whether Little Smart service in China will be shut down with less government involvement remains to be seen. Opportunities for increasing costs for users and degrading quality of service are much better for Little Smart than for free, over-the-air television broadcasts. Even if China Telecom and China Netcom cannot raise monthly fees and per minute rates for Little Smart, they can add a variety of additional fees that effectively raise the cost of using Little Smart service.  In addition, a variety of opportunities exist for gradually degrading the quality of the service. Such actions, along with aggressive special discounts and promotions for Little Smart subscribers to shift to China Telecom/Netcom 3G service, may be sufficient to mitigate popular outrage at shutting down Little Smart.

Shutting down operations and services in a politically feasible way is as important for a well-functioning economy as is fostering the entry of new services.   Smart economic policy considers both the problems of entry and exit.

Notes:

[1] The facts in this and the subquent paragraphs, unless otherwise noted, are from  Wu, From Iron Fist to Invisible Hand, pp. 125-132, and Jack Linchuan Qiu (2005), The Accidental Accomplishment of Little Smart: Understanding the Emergence of a Working-Class ICT, paper prepared for the ARNIC High-Level Workshop on Wireless Communication and Development, October 7-8, 2005.

[2] Qiu (2005) p. 4.

[3] For a review of the data, see Federal Communications Commission (FCC) Media Bureau Staff Report Concerning Over-the-Air Broadcast Television Viewers, MB Docket No. 04-210, Feb. 28. 2005, and FCC, Annual Assessment of the Status of Competition in the Market for the Delivery of Video Programming, Thirteenth Annual Report (released January 16, 2009) pp. 53-4.

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Providing network infrastructure need not be limited to a choice between the model of public roads and the model of selling soap. The provision of public roads depends on market transactions for a variety of goods (construction worker services, trucks, asphalt, etc). Selling soap depends on a variety of public services (money supply provision, law enforcement, public right-of-ways, etc.). Whether in India, Ireland, or Silicon Valley, initiatives to provide network infrastructure are making interconnections between different organizational forms more complex. Revenue models are expanding from taxes, subscription, and advertising to include a variety of public and private sponsorships, in-kind contributions, and special benefits for anchor users.

Impurity is a traditional human concern. In some circumstances, another name for public-private partnership is bribery and corruption. Failed and wasteful network infrastructure projects that involve governmental entities undoubtedly exist. For-profit network providers, who cannot fail without serious public effects, have made dire business mistakes and squandered huge amounts of money. Government entities' judgments about the services that users value are not likely to be better than those that for-profit network providers have made.

The history of libraries in the U.S. suggests that organizational diversity can have enduring value in information infrastructure. In the American colonies and the United States prior to 1876, most organizations that founded libraries were neither government bodies nor commercial organizations. A wide variety of organizations established libraries (see Table 1). The most commonly created form of library was a social library:

a library owned by an association formed to establish and operate a library intended for its members' use. Usually, the members subscribed for stock in order to purchase the initial collection, which was general in subject matter. Then they were assessed a smaller sum (a "tax") each year to keep up the collection.[1]

Public libraries, meaning libraries that government bodies owned and made open to all or most citizens without a specific-purpose charge, began to grow only from the mid nineteenth-century. As late as 1900, about as many social libraries existed in the U.S. as did public libraries (see Table 2).

Public libraries had different characteristics than social libraries. Smaller populations and more recently settled areas favored social libraries, while larger populations in cities with a longer history favored public libraries. Social libraries had typical lifespans about thirty-five years, with considerable variance.[2] Public libraries tended to be more permanent organizations that endured in organizational form through jurisdictional consolidations. Public libraries had a more secure base of funding and grew in size relatively rapidly. Across the last twenty-five years of the nineteenth century, public libraries came to predominate among the largest libraries (see Table 3). These historical facts are consistent with general comparative organizational characteristics: compared to social organizations, government organizations are more difficult to establish and require more developed government administrative capabilities, government organizations are more enduring, and government organizations are more favorable for organizational growth. Shifts in library organizational forms were in part a response to changing demographic and political circumstances.

Different organizational forms, however, interacted significantly. Social libraries and public libraries coexisted as important forms of library organization for more than half a century. Through at least 1875 and possibly into the beginning of the twentieth century, social libraries were widely regarded as a valuable form of library organization.[3] Some public libraries evolved from the buildings and collections that social libraries established. In the 1930s, more than a sixth of all "public" libraries in cities with population 30,000 or greater were libraries for which "the library society and the town government shared control in a manner that makes it difficult to know how power was divided between the two bodies."[4]

In a long-run international historical perspective, the U.S. has had a relatively highly developed information economy. New organizational forms for book sharing, network infrastructure, and telephone service are not just necessary entrepreneurial experiments in rapidly changing technological circumstances. Diversity in the organizational forms of its information infrastructure has been an enduring characteristic of the U.S. information economy. Organizational diversity may be a key to growth of the information economy.

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Notes:

[1] From "Definition of Types," American Libraries Before 1876, Davies Project.

[2] McMullen (1985) p. 214.

[3] Id. pp. 218-20.

[4] Id. p. 223.

References:

McMullen, Haynes (1985), "The Very Slow Decline of the American Social Library," Library Quarterly, vol. 55, no. 2, pp. 207-225.

McMullen, Haynes (2000), American Libraries Before 1876 (Westport, Conn.: Greenwood Press).

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The Carnival of the Mobilists, a fine collection of blogging on mobile and wireless communication. Check out No. 29 over at Open Gardens.

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