Here Comes the Third Wave of Cord Cutting: Home Internet Service

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The trend of people cutting their home Internet connections in favor of wireless online connectivity is accelerating, according to the latest survey from Pew Research. No doubt fed by falling prices for wireless service and the spread of unlimited data plans, Internet cord cutting has now reached one in five Americans, almost double the level of two years ago.

The percentage of people who say they depend solely on their smartphones to connect to the Internet has risen steadily from 8% in 2013, to 12% in 2016, to 20% this year. Pew first highlighted the trend in 2015 when it recorded that the percentage of households with home Internet connections declined to 67% from 70% in 2013. That measure has since bounced around a bit, but stood at 65% in the latest survey from 2018, Pew reported.

The trend marks the third wave of cord cutting over the past few decades. In the first wave of cord cutting, people dropped their landline phone connections, starting around 2003, in favor of more convenient wireless connections. Almost 54% of households have only wireless phone service now, according to the most recent survey by National Center for Health Statistics.

The second phase, which helped popularize the phrase “cord cutting,” started around 2010 as the price of cable television subscriptions started to seem excessive after the big recession. The percentage of households subscribing to cable or satellite TV peaked at 88% in 2010 and has since sunk to 79%, according to surveys by the Leichtman Research Group.

Internet video viewing has skyrocketed, as viewers increasingly moved to everything from Netflix (NFLX, -0.89%) to short videos on Google’s (GOOGL, +0.51%) YouTube to cable-like packages of channels distributed over the Internet like Sony’s (SNE, -1.16%) Playstation Vue TV and AT&T’s (T, +1.03%)DirecTV Now. Fueling the trend is the massive shift to watching video on smartphones and tablets.

The latest wave of cutting home Internet could thwart the cable industry’s response to cord cutting of cable TV subscriptions. Analysts expected that most customers who fled cable TV would still buy home Internet service from cable companies. Higher prices for broadband could offset the loss of TV subscription revenue. That assumption may have to be revisited.

On the other hand, lately wireless carriers have been raising prices and makes their unlimited plans more complicated and less generous. If that trend continues, it could thwart the desires of those who want to cut the home Internet cord.