Smartphone sales pick up steam in U.S.

Nearly a quarter of all handsets sold in the U.S. during the fourth quarter were smartphones, according to the NPD Group, a market research firm.

A new study released on Tuesday indicates that about 23 percent of all handset sales in the U.S. during the fourth quarter of 2008 were smartphones. This was up from 12 percent of all handset sales in the fourth quarter of 2007.

But as sales soared, prices for these advanced phones dropped. In fact, the average price of a smartphone during the quarter dropped by 23 percent from $216 in the fourth quarter of 2007 to $167 during the fourth quarter of 2008, NPD said. Apple's new iPhone 3G, priced at $199 with a two-year service contract with AT&T, helped lead the growth in smartphone volumes, but also led the industry in terms of declining prices.

The $200 price range appears to be the sweet spot for consumers in this market. And other manufacturers including Research In Motion with its Blackberry Storm on Verizon Wireless, the T-Mobile G1, and the-soon-to-be-launched Palm Pre from Sprint Nextel all fall within this price range.

NPD also noted that high-speed data services are becoming more central to smartphones. And about two-thirds, or 66 percent, of smartphones sold last year now use 3G wireless networks. This is compared with about 46 percent of smartphones that used 3G a year ago.

This is good news for mobile operators, which are locking consumers into expensive data plans in exchange for subsidizing their handsets.

But as competition heats up, experts like Ryan Reith of IDC expect carriers to further subsidize these devices to compete with other carriers. The iPhone has been holding its value very well. But carriers are already starting to cut prices and offer special deals on other smartphones.

Only a month after it hit the market, the G1 started selling for $148 from Wal-Mart. And three months after it launched the Storm, Verizon Wireless is now offering a special "buy one get one free" promotion that allows customers who buy any BlackBerry device, including the Storm, to get another one free.

While these subsidies could attract new customers, they will also cut into mobile operators' profits.

NPD Group suggests that carriers and retailers look toward selling more accessories to help boost profits. The market research group found that more than half or 52 percent of smartphone buyers purchased an accessory when they purchased their phone, while only 41 percent of all cell phone buyers bought an accessory at the time of purchase.

[gefitz]

I don't know about the other providers, but I notice that Verizon Wireless is moving older Smartphone models by selling them without requiring a data contract. I got one for free, no data contract required.

Since I'm in a wifi cloud 99% of my days, I really didn't want to spend the $30-50/month for 3G...I wonder if I'm not alone here? And if providers will start loosening up their data-plan requirements on older-models?

[tehrani625]

I agree. I have a data plan for two months until my rebate goes through. I have wifi at school and at home and I usually don't go too far from ether. I have an LG incite on Att. So far so good. I like it, for the blue tooth, wifi, 3.0Mp camera and the 3g data is not that bad. Although I wanted to slap the sales man when he said that 3G could get to 10MBs, and averages about 1.5MBs.

[cheapcomputeruser]

You can get the LG Incite with wifi at Bestbuy for $99 no rebate and no $30 a month data plan, but if you do not have ATT&T to turnoff edge and 3g to the phone you will be charged for data at a rate of penny a K as the phone will use edge or 3g network some without you knowing it, the only reason to need edge or 3g if you are just using the phone on wifi is sending multimedia messages if you dont do that then you will not miss the edge or 3g

[myles taylor]

I think that makes sense. People are looking to save money and by combining devices (which is what smartphones do) you actually cut back on devices and services you have to spend on elsewhere.

[zincmann]

I just got mine from AT&T and will cancel my Data plan as soon as my rebate goes through also, as I don't need it. I got the HTC Touch Pro which is a great phone after i upgrade the ROM ;-). With the ever expandable Transflash slot it can become my main mp3 player, my GPS, my mini computer and my phone. I am all about device consolidation

[mtbarbee]

I'm thinking about getting a new smartphone, by continuing my acct. with ATT. I've read two posts about a rebate. What's the rebate for and why would that constitute cancelling a data plan?

[starjumper]

As soon as I find a job, my wife and I are both getting Iphones!!

[Constable Odo]

What makes you think you are going to find a job or at least one that pays decently enough while jobs are declining at a fast rate? But if you do, by all means, buy an iPhone or two.

I'm fairly certain that it was the birth of the iPhone that started smartphones selling to mainstream customers in high quantity. I know the BlackBerry was there for a good while but it was still mainly used by businesses for rapid email. It was a rather boring smartphone at that. I wonder who was using those WinMo handsets all this time.

[StennG]

Q: "I wonder who was using those WinMo handsets all this time"

A: 50 million high demographic business users, and enterprise buyers, and growing.

[cheapcomputeruser]

You can get the LG Incite with wifi at Bestbuy for $99 no rebate and no $30 a month data plan, but if you do not have ATT&T to turnoff edge and 3g to the phone you will be charged for data at a rate of penny a K as the phone will use edge or 3g network some without you knowing it, the only reason to need edge or 3g if you are just using the phone on wifi is sending multimedia messages if you dont do that then you will not miss the edge or 3g

[G1HappyGuy]

After having Windows-based phones for years, I bought the T-Mobile G1 last week. It's SOOO much better!! Of course the first app I downloaded from Android Market was "FART MACHINE" (it even has a timer for surprise fart attacks!)......But Android is the future, perhaps the iPhone killer!

[viper396]

'It's SOOO much better!! "...how? What's it do that any other phone doesn't? There's something dubious about a guy who hiimself "G1HappyGuy" and claims he used Windows smartphones for years. Especially since, after reading your profile, one of your prior post says you just bought an iPhone (May 3rd). Then in another post you pretend you don't have one. (May 11th)

...and before you answer, please, if you start into more geek banter about how "Open Source" or "linux" makes a phone better then you're surely out of touch with the average consumer.