Is the era of the home phone line coming to a close? If third-quarter results among the top operators are any indication, wireless continues to take on wireline voice in the home as more people cancel landline service and operators add wireless subscribers. But here’s the new wrinkle: the femtocell conversation is accelerating at a more rapid pace than once thought possible. And the improved indoor coverage these mini base stations offer might just be the catalyst that wireless substitution needs to move into the mainstream.

OK, sure, great-grandma probably won’t shut off the copper line she’s had since the day of Ma Bell. Some simply like the redundancy or the reliability a home landline represents. So far, only about 17 percent of households in the United States (20-plus million customers) have ditched landline for wireless, according to Nielsen Media, which predicts that 20 percent will be wireless-only by the end of the year. That’s a percentage made up primarily of college kids, tech heads, single road warriors and people who move a lot.

But a quick look at telco financials shows the tide is turning for more and more of us. AT&T Inc. (T), for instance, reported its third-quarter profits were up slightly, 5.5 percent — all thanks to success in wireless. The No. 1 domestic operator announced that the untethered sector, which accounts for about 40 percent of AT&T's total revenue, brought in a handy 21 percent profit and 2 million new net wireless subscribers.

That’s a contrast to the 990,000 home wireline phone lines AT&T lost in the third quarter. Plus, it should be considered, that its overall wireline business declined 2.2 percent. Put in perspective, even though broadband sales were up for AT&T, that fact wasn’t enough to fully make up for the home landline losses.

The story is similar for Verizon Communications Inc. (VZ). Verizon added 1.5 million new mobile subscribers in the third quarter of 2008, which along with its FiOS fiber service accounted for a 31 percent increase in earnings. Meanwhile, its traditional phone line accounts fell a full 12 percent year over year.

Both LECs face competition in the home from wireless carriers T-Mobile USA and Sprint-Nextel Corp. (S), which have tried to poach home users by solving the notorious problem of poor indoor wireless coverage, a factor that is widely considered as one of the only things holding most subscribers back from going all-wireless. T-Mobile is marketing unlimited home phone service, Hotspot@Home, by offering dual-mode cell phones and leveraging Wi-Fi access points that offer POTS-level voice quality and cheaper tariffs inside the home. Sprint, meanwhile, has launched its Airave femtocell service. The femtocell CPE plugs into existing cable, DSL or fiber broadband connections to provide copper-like wireless voice quality and broadband wireless data rates within the home calling area.

So perhaps it’s not surprising Verizon and AT&T are having an “if you can’t beat ’em, join ’em” moment. Verizon said this fall it’s still evaluating femtocell technology for its CDMA-based 3G network, and might possibly have a femto rollout starting in early 2009, depending on how user trials go. And AT&T earlier this year signed a $500 million deal with U.K.-based ip.access Ltd. for 7 million GSM-based femtocells, which AT&T reportedly will sell to consumers for as little as $100 each.

Both AT&T and Verizon would have a competitive advantage over wireless-only operators, being able to bundle the broadband, wireless and femtocells into packages. It’s a new version of the triple play.

Of course, femto deployments face plenty of obstacles and questions, but Infonetics Research says the snowballing rollouts of ultra-fast 3G HSPA technology are shaping up to be a key driver behind femtocell adoption, along with the cost savings femtos offer (voice calls are converted to packet and are backhauled via the broadband connection, offering much cheaper rates than otherwise possible).

“When HSPA becomes more widely available, mobile broadband adoption, which has been unabated in recent years, will get an extra push,” said Richard Webb, directing analyst for WiMAX and mobile devices at Infonetics Research. “Femtocells, in turn, should see an uptick in adoption, as they provide consistent indoor wireless coverage and give mobile operators a stronger positioning in the home broadband network. Once launched, femtocells offered with home-zone tariffs could be seen as a ‘recession buster’ deal for consumers seeking to reduce mobile voice call charges, and the early market could see decent growth, despite the prevailing economic climate."

In fact, Infonetics predicts 2009 will be the first year of significant traction for the femtocell and femtocell gateway markets. And with operators losing home lines, people having access to faster wireless networks and cooler devices, and cheaper femtocell CPE on the way (Design Art Networks, for one, is developing a system-on-a-chip aimed at an under-$100 femtocell), it might just be the tipping point for wireless substitution as well.