Image: Three people use BlackBerry devices
Richard Drew  /  AP file
BlackBerrys are probably the single most popular smartphone, but Apple's iPhone and Palm Treos and Centros are also dominant consumer choices for cell phones that can also handle e-mail and Web surfing.
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msnbc.com
updated 6/9/2008 8:59:31 AM ET 2008-06-09T12:59:31

At a time when sales of cell phones are slowing in the United States, there's one kind of mobile device that appears to be defying the trend: smartphones.

Whether you're an Apple fan or not, there's no question the company's iPhone, with a new model to be announced today, has helped contribute to the recent success of smartphones, devices that can handle e-mail and Web surfing, as well as other programs.

Lower monthly prices on phone data plans, a growing consumer interest in using the mobile Internet and a wide offering and price range of devices are all also among reasons for smartphones' success.

"Despite economic concerns, the smartphone market continued to expand in the United States, driven by heavy advertising and strong marketing promotions as more devices reached mass-market price points," Gartner analyst Hugues De La Vergne told the Associated Press recently.

Cell phone sales in general  in the U.S. were down 22 percent in the first quarter this year, compared to the first quarter of 2007, according to The NPD Group.

However, smartphone sales represented 17 percent of all cell phone sales in the first quarter of 2008, up 10 percent from the same period last year, the research firm said.

Step back a bit further in time, and the smartphone trend is evident. In 2006, smartphones accounted for 5.1 percent of all mobile phones shipped in the U.S., and last year that number more than doubled, says IDC Research.

Apple’s impact on the field has been huge in a relatively short period of time. It went from zero percent of the smartphone market in the first quarter of 2007 — before the iPhone was released — to 19.2 percent in the first quarter of 2008, according to IDC.

Research In Motion, which makes the BlackBerry line of smartphones, dominates the market with a 44.5 percent share in the first quarter of this year. Apple is second, and Palm third, according to IDC Research.

'Prosumer' appeal
iPhone iWannabesSmartphones’ appeal began with the business set, but has quickly spread to busy moms, college students and folks who are just plain squeezed for time — which pretty much includes everyone these days.

“In the past several quarters, there’s been the development of this prosumer segment,” said Ramon T. Llamas, IDC senior research analyst for mobile technology and trends.

“It’s the kind of user who says, ‘I want more from my mobile phone. I want e-mail. I want to surf the ‘Net. I want to be in touch with a whole lot of folks, and I want to run a whole lot of high-powered applications on my phone.’ ”

The iPhone appeals to this market, and RIM has stepped up its efforts in the consumer field, with its Pearl and Curve models.

ComScore research firm surveyed more than 2,000 U.S. wireless customers earlier this year and found that 36 percent said they access the Web from their mobiles more than once a day, up from 18 percent in 2006.

"Mobile Internet usage is at a tipping point," ComScore said in its March report.

Smartphones usually come with calendar software, and often, but not always, include keyboards, whether a tactile QWERTY one or on a touchscreen.

Their costs vary widely, from the $99 Palm Centro, offered by Sprint and AT&T (with a two year-contract), to more than $600 for a high-end smartphone by HTC, appropriately called the Touch Diamond, that is just being released in Asia, but won’t be in the United States until the fall. In between is a range of prices and choices.

J.D. Power and Associates, in a May 29 report on cell phone pricing, noted that the average purchase price by customers for a phone is $101, up $9 from “just six months ago,” and is the highest average price paid for a cell phone since the firm started studying phone pricing in 2003.

“As more customers start to upgrade to mobile phones that offer real-time connectivity and access to Internet content — particularly those offered by smartphone devices — we should continue to see the wireless handset price point rise,” said Kirk Parsons of J.D. Power, in a statement.

Cheaper data plans
This spring, several U.S. carriers started offering unlimited use data use as part of a total $99-a-month plan, something that will likely continue to spur smartphone sales.

“We’ve seen several efforts to make it much easier for consumers to get hooked, so to speak, on smartphones,” said Avi Greengart, Current Analysis’ research director for mobile devices.

“The best two examples have been the iPhone plan, which has a mandatory inclusion of all-you-can-eat data in a plan for $59 a month and up, and Sprint’s ‘Simply Everything’ $99-a-month plan," he said. "Now all (major) carriers have some form of unlimited data plan.

“This is more palatable when you know what the cost is going to be upfront, and you know you’re not going to have overages that are charged to you by the byte or kilobyte.”

The iPhone and the BlackBerry are, so far, the most-wanted of smartphones.

“They’re the ones that define the two ends of the market,” said Rob Enderle, president of The Enderle Group, a consulting firm that studies technology trends.

“On one extreme end, you’ve got RIM on the corporate side, and on the other, Apple on the consumer side,” with both trying to move in on the other’s turf.

In the middle are companies like Palm, Samsung, Nokia and Motorola. Palm took the biggest hit in market share, according to IDC, going from 23 percent in the first quarter of 2007 to 13.4 percent in this year's first quarter.

Palm, Enderle said, has a new line of smartphones due in the second half. “They’ve got a complete redesign coming. It will be a make-or-break thing for them.”

Web surfing is key
The iPhone’s ability to easily access the Web is one of its most popular features.

As Greengart noted in a recent interview with msnbc.com, if you ask iPhone users what phone they had before, “more often than not, it’s a phone that had Internet, too, but they just didn’t know. Part of that is because Apple has done a very, very good job of making the iPhone Web-browsing experience a good one.”

Research done by Rubicon Consulting of 460 iPhone users found that about half of them said they had a “conventional” cell phone before moving to an iPhone. Another 40 percent said they bought the iPhone to replace their previous smartphone.

The remaining 10 percent “didn’t replace anything, meaning either that the iPhone is their first phone, or that they carry it in addition to a second phone,” the Rubicon study said.

While Apple and RIM will likely continue to dominate the field, other companies, such as Samsung, Sony Ericsson and Motorola, are looking to refresh and upgrade their smartphone offerings.

“We’re at the point where we’re seeing a lot of other folks getting into the smartphone space here in the U.S.,” said Llamas of IDC. “It’s a pretty hot market.”

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