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Telecommunications costs – phone installation and the cost of time spent on calls – have fallen sharply in recent years, so why is it that OECD households are devoting an ever larger share of their income to communications?

Food, clothing and household equipment are all taking up a smaller share of the family budget than a decade ago, and while services such as health, education and water have increased their share, none has boosted its part of household spending as significantly as communications.

One reason, of course, is the advent of the Internet and the mobile phone, which helps explain the acceleration of the growth in communications spending from 1995, the latest edition of the OECD Communications Outlook shows (see article by Sam Paltridge et al). But it is also true that cheaper calls have encouraged people to spend more time talking on the phone – and at greater distances – than before, ultimately putting more cash in the telecommunications companies’ coffers.

Households devoted about 1.6% of their consumer spending to communications in 1991, but this had risen to 2.3% by 2000, or an extra US$399 per person per year. A sizeable proportion of that money went on mobile phones, with the number of users increasing from 15 million to 600 million during the decade. During the same period, spending on food and non-alcoholic drinks fell from 13.4% of the total to 10.7%, while spending on clothing and footwear fell from 6.9% to 5.7%.

As much as 90% of communications spending goes on telecommunications services, with 8% for telecoms equipment, and the remaining 2% being spent on good old-fashioned postal services. The average monthly spending on communications in OECD countries is around US$62.50, although the level varies between countries from about US$40 to US$106.

©OECD Observer No 238, July 2003

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