NEW YORK (Dow Jones)--Mark Thomas has lost his audience.

For years the classical pianist, who also runs a Web site devoted to listing pay-phone numbers and their locations, has randomly called public phones and played a musical piece to whomever picks up. But with the dwindling number of phones, many of which are now restricted from accepting incoming calls, Thomas no longer performs random acts of communication.

Perhaps it's because of the efforts of Thomas and other pay-phone enthusiasts, but industry observers believe that trend is slowing. Indeed, some are hoping that public telephones find a new niche in modern life.

Once ubiquitous in restaurants, airports and on the streets, pay phones have seen their relevance questioned with the increasing popularity of wireless devices such as cellular phones, Blackberrys and laptops with wireless Internet access. Over the years, pay phones have attempted to change with the times, often with mixed results. Technology enthusiasts are constantly writing them off, yet there remains a need for public pay phones, as demonstrated during the blackout that paralyzed much of the Northeast in July 2003.

"As long as there are poor people who can't afford phones...and as long as there are people who get into trouble or somehow land themselves into emergency situations, I think that public telephony should be a right and not a privilege, " Thomas said.

His site (http://www.payphone-project.com) holds roughly half a million numbers, which have been used to help uncover crank callers and track runaway teen-agers or deadbeat dads.

There's no denying the decline in public phones. Five years ago, there were 2.1 million coin-operated phones in the U.S. By 2003, that number had dwindled to 1.5 million, according to the most recent figures from the Federal Communications Commission. That year, U.S. pay phones generated $1.06 billion in revenue, less than half the $2.22 billion generated in 1999. Some believe those numbers have fallen even further, with the number of phones as low as 1.3 million.

Verizon Communications (VZ), which operates nearly a quarter of the pay phones in the nation, has seen a similar decline in numbers. Spokesman James Smith said pay phones have lost about 15% of their call volume each year.

Operators such as Verizon have taken out phone banks, leaving a single phone. Some of the other declines have come from removals in low-use areas. In certain cases, Verizon charges property managers who insist on maintaining a pay phone. The company doesn't break out information on its pay-phone business.

But that decline seems to be slowing down, and Smith believes the pay-phone industry is reaching the right balance in the number of locations compared to the reduced demand.

"Given the proper management, the pay-phone business can go on indefinitely," he said.

Indeed, a pay-phone business in Stockton, Calif., is currently up for sale. According to the listing, the business, which operates about 60 phones, nets almost $65,000 a year for 20 hours a week of work.

According to the American Public Communications Council Inc., a trade group that represents independent pay-phone operators, call volume has held steady in recent months.

"I think we've probably hit the floor," said APCC President Willard R. Nichols. While he doesn't see an increase, he also doesn't see the number of pay phones going below 1.3 million.

Internationally, pay phones are used more in emerging markets such as Brazil or India, places where cellphone usage isn't as widespread, according to Gartner analyst Ron Cowles. But eventually, he said, even those regions will see the same declines as in the U.S.

Attempting To Adapt

The traditional phone booth still holds a hallowed place in American culture. Who can forget Clark Kent dashing into one to transform into Superman? Or reporters racing into a booth to call in a breaking story?

But the phone booth has gone by the wayside in favor of smaller phone pedestals or mini-booths. Such is the nature of the pay phone, which over the years has attempted to adapt to the needs of an evolving world.

Some changes were logical. The phone booth itself was a way for phone companies to address consumers' need for more privacy. But after a quick walk along any crowded street today, it's clear that's no longer a concern. The move away from booths came as a result of convenience for the companies, who were often dismayed that their booths were used as public restrooms in seedier areas. It was such a problem that efforts were made to design a "deflector plate" to prevent those activities, according to Warren Koontz, a professor at Rochester Institute of Technology and former employee at Bell Labs.

Some technology enthusiasts continue to give pay-phone innovation a go. Phillip Torrone, associate editor of do-it-yourself technology magazine MAKE, cobbled together a prototype of a pay phone using Internet telephony software from Skype.

He wired an old pay phone to a computer outfitted with Skype's free software, which allows people to talk over the Internet for free to other Skype users and for 2.6 cents a minute to non-Skype users in the continental U.S.

Torrone wanted to update the pay phone because he thinks the battle-tested metal exterior has "a 'cool' factor," he said. "It's very Matrix-like," he added, referring to the cult science-fiction movies in which pay phones play a prominent role.

Numerous people have expressed interest in the idea, which could find uses in Internet cafes or in less-developed countries where mobile phones are less pervasive, Torrone says.

Still, there's little evidence that investors are willing to put money into reviving a fading technology.

Leading Internet telephone company Vonage Holdings Corp., for instance, isn't biting. "The pay-phone business probably doesn't make sense for us," said Vonage Chief Executive Jeffrey Citron.

The expense of acquiring real estate for the phones as well as the fact that most pay phones are used to make toll-free calls limits the potential payoff. " It's a shrinking market," Citron said.

Other stabs at improvements have fallen through. Verizon attempted to drag pay phones into the Internet Age by adding wireless fidelity "hot spots" to Manhattan sites in 2003. The New York City project met with little enthusiasm, and is currently being dismantled.

"Maybe it was an idea whose time has yet to come," Smith said. "Either we were ahead of ourselves, or it was something that they didn't need."

Yet there is still innovation in this supposedly dead area. Verizon is working to provide cheaper international rates available at pay phones in minority communities to attract usage, and other operators aren't giving up on the idea of using pay phones as wi-fi access points.

-By Roger Cheng, Dow Jones Newswires; 201-938-2020; roger.cheng@dowjones.com

-By Chris Reiter, Dow Jones Newswires; 201-938-5244; chris.reiter@dowjones.com

  Dow Jones Newswires
  05-27-05 1411ET