How mobile phone adoption is driven by income

It should come as no surprise that the world’s most populous nation, China, is home to more cell phone users than any other country. Despite this, the penetration of mobile phone usage there and in India, which ranks second in population and number of mobile phones in use, is only about two-thirds of the total population. This means that roughly every third person in those countries still uses a landline phone or, as is more likely the case in very rural areas, no phone at all.

In developing nations wired communications networks have not yet reached all communities. As a result, over the last decade telecom carriers have pushed mobile service in rural areas to meet growing demand. Wireless infrastructure is cheaper and easier to install than that of traditional wired networks. For many people, a mobile phone is their first phone.

Meanwhile, in the US, where mobile penetration is 96%, people increasingly use cell phones as a supplement to their traditional home telephone, if not as their primary phone. As reported in The New York Times, a study published this week by the National Center for Health Statistics (a unit of the Centers for Disease Control and Prevention) identifies Arkansas, Mississippi and Texas as states having the highest number of people who use a mobile phone exclusively, more than 30%.

The study notes that in the US there is a strong correlation between poverty and the use of a mobile phone as the only means of telecom network access. This echoes the progression of rural wireless usage in developing nations, where per capita income tends to drop off sharply outside of urban centers.

In contrast, a cluster of wealthier states in the Northeastern US (as well as in Alaska, California, Montana and South Dakota) have the fewest number of households that only use a mobile phone. At the top of this list are Connecticut, New Jersey and Rhode Island, states where cell-phone only callers make up just 13% of the population.

Holdouts aside, the broader trend is that landline telephone subscriber numbers continue to shrink, forcing telecom carriers to invest more heavily in their wireless businesses. This is also driving consolidation among smaller regional phone companies. To survive, they are building wireless networks of their own or partnering with the big telcos to resell branded wireless service in hopes of stemming customer defection to national mobile brands.

So what happens when every man, woman and child in the US has a cell phone in their pocket and a Bluetooth earpiece affixed to their head? Sprint Nextel CEO Dan Hesse, for one, is optimistic that he will be able to continue selling wireless subscriptions even after the market is saturated. He told Wireless Week in March that “A lot of people are going to have three or four mobile devices.” As unlikely as this scenario may seem to some, particularly given the state of the economy over the past few years, many of the world’s wealthiest nations do boast very high rates of wireless phone ownership. At the high end of the scale, it was estimated last year that in the United Arab Emirates, mobile phone penetration was at 193.5%.

Photo by Dipanker Dutta, used under a Creative Commons license.
Jason Cella

Jason Cella has covered the IT and telecommunications industries as an editor and writer at Hoover's since 1998.

Read more articles by Jason Cella.

Leave a Comment