Spending on Telephone 

Service

Brett Creech

Brett Creech is an economist with the Branch of 

Information and Analysis, Division of Consumer 

Expenditure Surveys, U. S. Bureau of Labor 

Statistics

I

n recent years, the use of cellular 

phones has increased compared 

with that of residential landline 

telephones. This trend can be attributed 

to the wider availability and greater 

flexibility that cellular phones offer. 

Indeed, spending on cell phones has 

risen to the point that it nearly matches spending on traditional landline 

phones. Monthly cellular phone rate 

packages are now quite comparable 

to residential telephone rates and can 

include many features, such as free 

long-distance calling and text messaging, which are not included in most 

residential phone packages. Because 

of the flexibility and mobility of cellular phones, more households are using 

them as their main telephone source, 

thereby eliminating the need for residential landline telephone services. 

Data from the Bureau of Labor Statistics (BLS) Consumer Expenditure Survey (CE) show that cellular phone expenditures increased rapidly from 2001 

through 2006. In comparison, average 

expenditures on residential telephones 

decreased during the same period.

In the CE, telephone service expenditures are divided into four major 

categories: residential telephone/pay 

phone, cellular phone service, pager 

services, and phone cards. This report 

focuses on comparing total expenditures on residential telephone and cellular phone services overall and by age 

group. The residential telephone and 

cellular phone service data presented 

are from unpublished CE estimates that 

show more detail than the published annual tables provided on the BLS public 

Web site. 

In 1991, the CE began data collection on mobile car phones. The 

CE questionnaire asked respondents 

about their expenditures on telephone 

services in their home city (excluding 

mobile car phones) and their expenditures on telephone services for mobile 

car phones. In 2001, as these devices 

became more portable, the CE broadened the question about mobile phones 

to generally include all cellular phone 

services. Also in 2001, the survey began to include questions aimed at capturing data on expenditures for phone 

cards and pager services.

Average Annual Telephone 

Expenditures

From 2001 to 2006, increases in telephone expenditures kept pace with the 

increase in total annual expenditures, 

so that the share of telephone expenditures out of total annual expenditures 

remained fairly constant over that period; interestingly, the increase in expenditures on telephone services is due 

almost exclusively to higher expenditures on cellular phone service. Table 

1 shows that average annual telephone 

service expenditures for all consumer 

74 Consumer Expenditure Survey Anthology, 2008
Table 1. Average annual expenditures (AAE) and percent distribution of telephone service expenditures for all consumer units, by age 

group, consumer expenditure survey, 2001–06 

2001 2001 2002 2002 2003 2003 2004 2004 2005 2005 2006 2006

AAE

Percent 

distribution

AAE

Percent 

distribution

AAE

Percent 

distribution

AAE

Percent 

distribution

AAE

Percent 

distribution

AAE

Percent 

distribution

All consumer units ................. $39,518 $40,677 $40,817 $43,395 $46,409 $48,398

Telephone services................ 914 100.0 957 100.0 956 100.0 990 100.0 1,048 100.0 1,087 100.0

Residential telephone/

 pay phone ...................... 686 75.0 641 67.0 620 64.8 592 59.8 570 54.4 542 49.9

Cellular phone service...... 210 23.0 294 30.7 316 33.1 378 38.2 455 43.4 524 48.2

Other services.................. 19 2.0 22 2.3 20 2.1 20 2.0 23 2.2 21 2.0

Age 

Under 25 years...................... 23,526 24,229 22,396 24,535 27,776 28,181

Telephone services................ 629 100.0 641 100.0 616 100.0 642 100.0 744 100.0 722 100.0

Residential telephone/

 pay phone ...................... 423 67.2 346 54.0 278 45.1 245 38.2 247 33.2 195 27.0

Cellular phone service...... 165 26.3 259 40.4 313 50.9 371 57.8 472 63.4 502 69.5

Other services.................. 41 6.5 36 5.7 25 4.0 26 4.0 25 3.4 26 3.6

25–34 years........................... 39,451 40,318 40,525 42,701 45,068 47,582

Telephone services................ 1,001 100.0 1,032 100.0 1,001 100.0 1,028 100.0 1,099 100.0 1,129 100.0

Residential telephone/

 pay phone ...................... 712 71.1 642 62.2 592 59.1 537 52.2 495 45.0 434 38.4

Cellular phone service...... 263 26.3 360 34.9 377 37.6 465 45.2 572 52.0 658 58.3

Other services.................. 26 2.6 31 3.0 33 3.3 26 2.6 32 3.0 38 3.3

35–44 years........................... 46,908 48,330 47,175 50,402 55,190 57,546

Telephone services................ 1,035 100.0 1,096 100.0 1,097 100.0 1,145 100.0 1,208 100.0 1,271 100.0

Residential telephone/

 pay phone ...................... 761 73.5 713 65.0 696 63.4 665 58.0 633 52.4 599 47.2

Cellular phone service...... 254 24.6 358 32.7 379 34.6 451 39.4 545 45.1 649 51.1

Other services.................. 20 1.9 25 2.3 22 2.0 29 2.5 30 2.5 22 1.8

45–54 years........................... 47,930 48,748 50,101 52,764 55,854 57,563

Telephone services................ 1,072 100.0 1,109 100.0 1,156 100.0 1,178 100.0 1,229 100.0 1,269 100.0

Residential telephone/

 pay phone ...................... 786 73.3 723 65.2 724 62.7 682 57.9 660 53.7 621 48.9

Cellular phone service...... 268 25.0 365 32.9 413 35.7 479 40.7 548 44.6 627 49.4

Other services.................. 18 1.6 21 1.9 19 1.6 17 1.4 21 1.7 21 1.7

55–64 years........................... 41,462 44,330 44,191 47,299 49,592 50,789

Telephone services................ 926 100.0 981 100.0 981 100.0 1,040 100.0 1,077 100.0 1,115 100.0

Residential telephone/

 pay phone ...................... 718 77.5 697 71.0 680 69.3 673 64.7 638 59.2 623 55.9

Cellular phone service...... 194 21.0 266 27.1 285 29.0 353 34.0 422 39.2 476 42.7

Other services.................. 14 1.5 19 1.9 16 1.6 13 1.3 17 1.6 16 1.4

65 Years and Older................ 27,714 28,105 29,376 31,104 32,866 35,058

Telephone services................ 652 100.0 689 100.0 673 100.0 695 100.0 733 100.0 770 100.0

Residential telephone/

 pay phone ...................... 560 85.9 555 80.6 541 80.4 542 78.0 541 73.8 548 71.2

Cellular phone service...... 85 13.1 125 18.2 122 18.2 144 20.8 180 24.6 213 27.7

Other services.................. 7 1.0 9 1.2 10 1.5 9 1.2 12 1.6 9 1.2

Consumer Expenditure Survey Anthology, 2008 75
units1

 increased by 18.9 percent from 

2001 through 2006, compared with an 

increase of 22.5 percent for total annual expenditures during the same period. In 2006, total annual expenditures 

averaged $48,398 per consumer unit, 

of which 2.2 percent ($1,087) was allocated to telephone expenditures. In 

comparison, total expenditures in 2001 

averaged $39,518 per consumer unit, 

of which 2.3 percent ($914) went to 

telephone expenditures. 

Chart 1 displays the change in average annual residential telephone/pay 

phone expenditures and cellular phone 

service expenditures from 2001 through 

2006. Expenditures for cellular phone 

services per consumer unit grew from 

$210 in 2001 to $524 in 2006, an increase of 149.2 percent. Expenditures 

for residential telephones/pay phones 

per consumer unit decreased from $686 

in 2001 to $542 in 2006, a decline of 

21 percent. 

Put another way, table 1 shows that 

the expenditure share of cellular phone 

services out of total telephone expenditures has increased. In 2001, the ratio 

of spending on residential telephone/

pay phone expenditures to spending 

on cellular phone expenditures was 

greater than 3 to 1. In 2006, the shares 

of these two components were almost 

equal, with residential telephone/pay 

phone expenditures accounting for 49.9 

percent of total telephone expenditures 

and cellular phone expenditures2

 constituting 48.2 percent. In addition, the 

percentage of households reporting 

cellular phone expenditures, increased 

from 34.1 percent in 2001 to 52.8 percent in 2006.3

 Also, the percentage of 

people who reported having cellular 

phone expenditures but no residential 

telephone expenditures increased: In 

2006, 12.3 percent of respondents reported having cellular phone expenditures, but no residential telephone 

expenditures, compared with only 1.5 

percent in 2001.

Age

One interesting way to analyze the 

shift of expenditures from residential 

telephones to cellular phones is by age 

group. Table 1 shows expenditures on 

telephone services and its components 

by six age4

 groups. From 2001 through 

2006, consumer units whose reference person was 25 through 64 years 

spent about the same amount annually 

for telephone services. In 2006, that 

amount was about $1,200. Similarly, 

consumer units whose reference per4

 Age groups are determined by the age of 

the reference person—the first person mentioned 

by the respondent when asked to “start with the 

name of the person or one of the persons who 

owns or rents the home.” It is with respect to 

this person that the relationship of the other CU 

members is determined.

Chart 1. Residential and Cellular Phone Expenditures, 2001–06

Residential telephone services

Cellular phone service

Average annual 

expenditure

(dollars)

Average annual 

expenditure

(dollars)

750 750

600 600

450 450

150 150

300 300

2001 2002 2003 2004 2005 2006

76 Consumer Expenditure Survey Anthology, 2008

1

 A consumer unit is defined as all the 

members of a household related by blood, 

marriage, adoption, or other legal arrangement; a 

single person living alone or sharing a household 

with others, but who is financially independent; 

or two or more persons living together who share 

responsibility for at least 2 out of 3 major types of 

expenses—food, housing, and other expenses.

2

 Expenditures on phone cards and pager 

services accounted for 2.0 percent of total 

telephone expenditures in 2006. Due to the small 

size of these expenditures, this report focuses on 

the comparison of cellular phone services with 

residential telephone services. Table 1 refers to 

expenditures on phone cards and pager services 

as “other services.” 3

 All percentages cited in this report were 

derived from average quarterly percent reporting 

totals for 2001 and 2006.
in 2003. Those aged 25 to 34 years followed suit in 2005, while those aged 35 

to 44 years shifted in 2006. 

Summary

This article has presented cellular phone 

service and residential telephone service spending patterns for all consumer units and by age group from 2001 

through 2006. The CE data show that 

cellular phone expenditures increased, 

while residential telephone service expenditures decreased, over that period. 

Wider availability and price packages 

that are comparable to residential telephone packages have been the main 

sources of this increase. Also, cellular 

phone expenditures are now the majority of total telephone expenditures in 

three of the six age groups researched 

in this article. The CE will continue to 

analyze the data to see if cellular phone 

expenditures eventually become the 

majority of total telephone service expenditures for all age groups. 

Chart 2. Distribution of cell phone expenditures, by age group, 2001–06

son was under 25 years or 65 years and 

older reported comparable levels of 

telephone service expenditures ($722 

for those under 25 years, and $770 for 

those 65 years and older, in 2006).

However, since 2001, the distribution of telephone service expenditures 

between residential telephone/pay 

phone services and cellular phone 

services changed significantly in all 

age groups. For example, in 2001, the 

share of cellular phone services out 

of total telephone services for consumer units whose reference person 

was under 25 years was 26.3 percent. 

By 2006, the share had risen sharply, 

to 69.5 percent. Similar, but less dramatic, shifts occurred in all age groups 

from 25 through 64 years. This change 

in the distribution of expenditures has 

been so widespread that the majority 

of consumer units are now spending 

more on cellular phone service than on 

residential telephone/pay phone services. Although the shift in expenditures 

was not as great for consumer units 

with reference person aged 65 years or 

older, even that age group saw a significant increase in its cellular phone 

service expenditures. In 2001, cellular 

phone expenditures accounted for 13.1 

percent of total telephone expenditures 

for those consumer units. By 2006, the 

group’s cellular phone expenditures 

had increased to 27.7 percent of its total telephone service expenditures.

Chart 2 demonstrates how the shift 

in expenditures toward cellular phones 

has occurred. In 2006, for all age groups 

under age 45, cellular phone expenditures constituted the majority of total 

telephone expenditures. The situation 

differed from that of 2001, when the 

majority of total telephone expenditures for all age groups were residential 

telephone/pay phone service expenditures. The under-25 age group was the 

first age group for whom spending on 

cellular phones accounted for the majority of total telephone expenditures, 

Cell phone 

expenditures 

as a percent of 

total telephone 

expenditures

70 70

60 60

50 50

20 20

30 30

2001 2002 2003 2004 2005 2006

40 40

10 10

Cell phone 

expenditures 

as a percent of 

total telephone 

expenditures

 

Age 25–34

Age 55–64

Age 35–44

Age 45–54

Under 25

65 and older

Consumer Expenditure Survey Anthology, 2008 77