Cell Phone Obsolescence

I try to avoid making predictions because as Niels Bohr once said “prediction is very difficult, especially about the future.” However, I see the world on the verge of a long, slow decline in cell phone use.

Am I predicting that people will no longer feel the need to have a phone with them at all times? Absolutely not. As a matter of fact, I think that the percentage of people who carry communications devices is likely to increase in the future.

Cell phones are going to be replaced. Roaming calls will eventually be carried over the internet rather than a separate cell phone network. Many of us have wireless internet set up in our homes with a data rate many times higher than is needed to carry a phone call. In fact, if you used a cell phone continuously day and night for a month, the total amount of voice data transmitted would be less than the 60 Gigabyte monthly cap on typical home high-speed internet plans.

Technology to carry phone calls over the internet (called voice over internet protocol (VOIP)) exists today, but has many problems. It tends to be somewhat flaky, and some approaches have you talking into your computer rather than a regular handset. However, technical problems will be overcome.

Imagine your home phone connecting wirelessly to your internet modem instead of connecting to a base station that you plugged into one of your phone jacks. Imagine further that this internet phone can connect to the internet at any other wireless hot spot. Some of us have become accustomed to finding hot spots for using a laptop; why not use them for phone calls too?

None of this would work very well right now, but it will get better with time. Ubiquitous wireless internet access will come eventually, and it will be used for voice communications as well. This will eliminate the need for a costly cell phone “plan”. You won’t need a plan for your phone any more than you’ll need a plan for your laptop.

All this will change the market for makers of devices like the BlackBerry. They will no longer need to sell them through companies that offer cell network connection plans. They will be able to sell these devices directly to the public in whatever way is most desirable. This may lead to increased competition for them.

Operators of cell phone networks are looking at a future of declining business. This doesn’t necessarily mean that they won’t be profitable, but if you’re an investor, don’t count on growth unless the company has plans to move into some new business.