As technology has advanced throughout the 21st century, mobile phones have morphed from functional devices used solely for voice into sophisticated portable computers. Smartphone users are now capable of texting, video conferencing, surfing the Internet, and playing music and video on their handheld devices. With this evolution in technology has come a meaningful increase in the amount of money devoted towards mobile phone services. Perhaps you have noticed that you are paying much more for your cellular service now than you were 10 years ago. Rest assured, you are not alone. Here's a look at how cell phones have evolved into an increasingly indispensable component of most people's budgets.

Cell Phone Bills Have Grown
Consumer spending on mobile phone service has grown quite significantly since the early part of this century. In fact, according to the Bureau of Labor Statistics, Americans only spent an average of $210 per year on cellular service back in 2001. That's less than $20 per month. This figure may strike you as unbelievably low. The average cell phone bill is now more than $63 per month or $760 per year as of 2010. Does this seem like a big increase in cell phone spending? Well, on an annualized basis, these figures reflect an increase of more than 15% per year from 2001-2010. This is quite a meaningful gain in money spent on cell phones, particularly when one considers that annual household expenditures only grew around 2% during that same time frame.

Cell Phones Vs. Landlines
Not surprisingly, alongside increased spending on cell phones has come decreased spending on landlines. Why pay for a home phone when a mobile phone meets all of your communication needs and then some? Here's an example to illustrate just how differently the dollars in most people's wallets are being spent now versus 10 years ago.

First, let's assume that you spend $100 per month for all of your telecommunications needs. This includes your mobile phone bill as well as your landline. Using this assumption, back in 2001 you would have spent $23 per month for your cell phone services. Your landline bill would be somewhere round $75. Clearly, landlines were much more important components of people's budgets at the outset of the 21st century. In 2010, your mobile phone bill would take a much larger share of your wallet and your landline a much smaller share. In 2010, you would have spent around $65 per month on your cellular plan but only $34 on your landline. This example helps demonstrate just how essential mobile phones have become in most people's minds.

Cell Phone Bills and Household Budgets
Spending on mobile phones is becoming a more meaningful component of total household expenditures. In recent years, many people have cut back on discretionary expenses such as dining out and clothing purchases. However, spending on mobile phone services has grown at a steady pace. As a result, mobile phone expenditures have increased as a percentage of household expenditures.

The Bottom Line
Evolution and advancements are to be expected, particularly when it comes to fast-changing technology such as mobile phones. Given the improved capabilities of cell phones since the beginning of the century, it is no wonder that cell phone bills have averaged a healthy annual growth rate in excess of 15%. Alongside the rise of mobile devices has come the fall of landlines, which see far fewer dollars devoted to them today versus 2001. Mobile phone costs are becoming an increasingly more relevant component of consumers' budgets. It makes you wonder just how much you will spend on your mobile phone service 10 years from now.

Related Articles
  1. Economics

    Understanding Switching Costs

    Consumers incur switching costs when they receive a monetary or other type of penalty for changing a supplier, brand or product.
  2. Investing

    What’s Holding Back the U.S. Consumer

    Even as job growth has surged and gasoline prices have plunged, U.S. consumers are proving slow to respond and repair their overextended balance sheets.
  3. Economics

    Explaining Market Penetration

    Market penetration is the measure of how much a good or service is being used within a total potential market.
  4. Economics

    Calculating the Marginal Rate of Substitution

    The marginal rate of substitution determines how much of one good a consumer will give up to obtain extra units of another good.
  5. Home & Auto

    4 Areas to Consider Roofing Material Types

    Roofing your home is very important, that’s why you should choose a roof specifically designed to handle your area’s climate.
  6. Stock Analysis

    Is the Apple Watch a Real Threat to Fitbit?

    Examine the potential for marketplace competition between Fitbit and the Apple Watch in the rapidly growing consumer wearables industry.
  7. Investing News

    How 'Honesty' Could Pay off for Jessica Alba

    Is it possible that Jessica Alba is one of the savviest businesswomen on the planet?
  8. Stock Analysis

    3 Stocks to Protect Your Portfolio from Inflation

    Discover three stocks to protect portfolios against inflation. The best companies to protect against inflation are those with pricing power.
  9. Budgeting

    The 5 Most Expensive States for Child Care

    To get a better sense of how child care costs can fluctuate, here's a look at the costs of child care across the country.
  10. Home & Auto

    Looking To Invest In Home Improvements?

    Some home improvement projects could cost you more to complete than they’ll pay out in equity. So, here we show you the worst projects to avoid.
RELATED TERMS
  1. Internal Rate Of Return - IRR

    A metric used in capital budgeting measuring the profitability ...
  2. Duty Free

    Goods that international travelers can purchase without paying ...
  3. Fast-Moving Consumer Goods (FMCG)

    These are consumer goods products that sell quickly at relatively ...
  4. Debt Consolidation

    The act of combining several loans or liabilities into one loan. ...
  5. Personal Spending Plan

    Similar to a budget, a personal spending plan helps outline where ...
  6. Virtual Good

    A good or product traded in the non-physical realm, typically ...
RELATED FAQS
  1. What does marginal utility tell us about consumer choice?

    In microeconomics, utility represents a way to relate the amount of goods consumed to the amount of happiness or satisfaction ... Read Full Answer >>
  2. What are some common ways product differentiation is achieved?

    There are many ways to achieve product differentiation, some more common than others. Horizontal Differentiation Horizontal ... Read Full Answer >>
  3. How does a bank determine what my discretionary income is when making a loan decision?

    Discretionary income is the money left over from your gross income each month after taking out taxes and paying for necessities. ... Read Full Answer >>
  4. What role does the OEM (original equipment manufacturer) play in the finished product?

    Original equipment manufacturers (OEMs) do not typically play much of direct role in determining the finished product. However, ... Read Full Answer >>
  5. What is the difference between an OEM (original equipment manufacturer) and a VAR ...

    An original equipment manufacturer (OEM) is a company that manufactures a basic product or a component product, such as a ... Read Full Answer >>
  6. Is the retail sector also affected by seasonal factors?

    Generally speaking, the retail sector is highly seasonal. Almost invariably, sales in the retail sector are highest in the ... Read Full Answer >>

You May Also Like

Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!