2009: The year of the smartphone

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From the Palm Pre to the iPhone 3GS to a slew of new Google Android Phones, like the Motorola Droid, smartphones were all the rage in wireless in 2009.

In February, analysts were already talking up the potential of the smartphone market. And now many believe sales of the advanced devices that connect to the Internet and offer a platform for different applications will soon overtake sales of regular cell phones.

Palm was the first to get the hype machine whirring at the Consumer Electronics Show in Las Vegas in January with its new Palm Pre.

When Palm finally launched the Pre in early June exclusively on Sprint Nextel's network, loyal Palm fans lined up for the device. Initial sales were decent, but the Palm Pre didn't even come close to creating the sales momentum experienced by Apple's iconic iPhone when it was first launched in 2007.

Still, the Pre launch was a turning point for the industry, and more manufacturers and wireless service providers continue to flood the market with new devices.

The latter half of 2009 saw the rapid expansion of Google Android phones. Google's open development operating system was launched in 2007, and as of the beginning of 2009, there was only one Android device on the market--the G1 sold by T-Mobile.

In June, T-Mobile USA and HTC introduced the second Android handset into the U.S. market, the MyTouch. And just before Android's second birthday, the much-anticipated flood of Android device announcements began. Manufacturers such as Samsung, Motorola, LG, and HTC all announced multiple Google Android devices.

The most noteworthy Android device hit the market in early November. Verizon Wireless launched the Motorola Droid amid a $100 million marketing campaign. The aggressive advertising push seems to be working; analysts estimate that Verizon and Motorola will sell at least 1 million devices by the end of the year.

Apple didn't sit still either in 2009. In June, the company started selling the iPhone 3GS. AT&T agreed to subsidize the older iPhone 3G even more, and consumers were suddenly able to buy an iPhone for $99.

A faster processor and more functionality on the iPhone 3GS sent sales through the roof for iPhones during 2009. And Apple reported that it sold 1 million devices worldwide the first weekend it was on the market.

Apple's iTunes-based App Store for the iPhone and iPod Touch had a good year as well. As of November, the App Store had more than 100,000 applications and more than 2 billion application downloads.

Apple's competitors also launched their own app stores in an effort to capitalize on the mobile app frenzy. Google launched the Android Market, which today has more than 20,000 applications. Research In Motion, which makes BlackBerry devices, launched the BlackBerry App World. Nokia launched its Ovi Store in some markets this year, though the store is still not available in the U.S. And Microsoft launched its Windows Marketplace for Mobile in October.

The rapid growth of the mobile app market has not been without consequences. Heavy mobile data users are starting to put a strain on wireless networks. Most notably, iPhone users, who tend to consume six to seven times more wireless data than other cell phone users, have been complaining of poor 3G wireless service on AT&T's network throughout the country, particularly in urban areas such as New York and San Francisco.

AT&T admits that it's a victim of its own iPhone success, but executives say it's only a small percentage of customers who are putting much of the strain on the network. And AT&T is already thinking of ways to help curb some usage.

At an investor conference in New York earlier this month, Ralph de la Vega, AT&T's head of wireless, said the wireless operator is considering incentives to get consumers to reduce their data usage. De la Vega said 3 percent of smartphone users are consuming 40 percent of the network capacity.

The comments stirred quite a bit of backlash, which coupled with poor network performance, might hurt AT&T's reputation in the long run, some experts say.

As smartphones hit the mainstream and more networks look constrained, many carriers are talking about the next generation of wireless networks. Clearwire, which has partnered with Sprint Nextel and has accepted funding from Google and Intel as well as the cable operators Comcast and Time Warner Cable, is already well on its way to building a nationwide 4G wireless network using a technology called WiMax. The company, which raised more money this year from some investors, is steadily announcing new cities where its new 4G WiMax wireless broadband service is available.

Verizon Wireless was also talking up its 4G wireless plans in 2009. Early in the year, at the Mobile World Congress in Barcelona, the company's CTO announced its roadmap for deploying 4G wireless service using LTE. The network is already being built and will be commercially launched in some markets starting in 2010.

Other carriers will also soon be discussing plans for their next-generation networks. But new networks will likely need more wireless spectrum, and the new Federal Communications Commission is already looking at ways to free up new spectrum, including taking some unused spectrum from TV broadcasters.

The excitement in the wireless market will likely continue in 2010 as more Android devices are expected to come on the market. Even Google is expected to launch its own branded phone. The next year will also likely be filled with more 4G wireless network news, and the ongoing battle for more spectrum will probably intensify. And of course, everyone will be waiting to see when and if Verizon Wireless finally gets the iPhone. Could 2010 be the year for a Verizon iPhone? Stay tuned to find out.

--by Marguerite Reardon