AT&T to Quit Payphone Business

The Buggles weren’t entirely right; video didn’t kill the radio star, but it did make him change his ways. The cell phone has done much the same to the payphone. On Monday, AT&T announced that it was getting out of the payphone business. AT&T spokesman Michael Coe noted, “More and more people are using their wireless phones instead of pay phones," adding that the payphone “is rapidly approaching the point where it will not be profitable.” Verizon remains the last big company in the space, and independent owners abound.

According to the Federal Communications Commission, the number of pay phones in the United States has declined from about 2.1 million in 1999 to an estimated 1 million. BellSouth Corp. left the payphone sector in 2003, before AT&T acquired it about a year ago. Qwest Communications International Inc. sold off its pay-phone division in 2004. AT&T will try to sell off its 65,000 payphones to independent operators rather than simply rip them out of the ground.

Willard Nichols, president of the American Public Communications Council Inc., the industry body for the independent payphone owners, said more than half of the remaining million payphones are owned by his members. “This transition shows that the pay phone is evolving, not that it's moving toward extinction,” he said.

The economics of the payphone aren’t very promising despite the fact that Americans still make about 1.7 billion such calls a year. Mr. Nichols says that it takes about 110 calls a month, 1320 a year, to keep a single phone profitable. That 1.7 billion calls divided by 1 million phones results in 1,700 calls a year -- profitable as a group, but the calls aren’t evenly divided up. Moreover, Mr. Nichols assumes each call costs 50 cents, enough that some consumers will go home to make the call.

For some, though, that isn’t an option. Even in the wealthy 21st century, Mr. Nichols noted, “The Census Bureau says that something between 7 million and 8 million US households have no phone of any kind, and the number is growing. People who live in those homes will continue giving pay phones the business they need to survive.” And no payphone user ever got hit with a fee for using more minutes than their plan allowed.

© Copyright 2007 by The Kensington Review, Jeff Myhre, PhD, Editor. No part of this publication may be reproduced without written consent. Produced using Fedora Linux.

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