Aggressive marketing, blazing fast 4G data speed and a barrage of high-performance devices seem to be achieving wireless carriers' desired effect: About half of U.S. mobile subscribers now carry smartphones, a top research company said Monday.
The quick-surfing devices, with their ability to stream video and download apps, games and music are cash cows for carriers who sell data plans in addition to voice coverage.
The nation's top carrier, for example, Verizon Wireless, now reports smartphone penetration of 47 percent of postpaid subscribers as of the first quarter, while rival AT&T, which has had Apple's top-selling iPhone longer than Verizon, reports 59 percent of postpaid subscribers have smartphones.
Feature Phones Share Sinking
And the latest survey by Nielsen Research found that the overall share of users of feature phones – those without operating systems or a robust applications market -- fell from 71 percent in October of 2010 to 50 percent this February. During the same period smartphone users soared to 49.7 percent, making it almost certain that the tipping point will shift in the next quarter.
The numbers are based on a survey of 70,000 mobile subscribers from January through March.
Ethnic minorities appear to be spearheading the drive: 67.3 percent of Asian-Americans and Pacific Islanders surveyed reported owning smartphones, as did 57.3 percent of Hispanics and 54.4 percent of African Americans, compared with 44.7 percent of whites.
"Typically, ethnic subscribers use prepaid services, which are at a lower price point," analyst Kirk D. Parsons of J.D. Power and Associates explained. "That is mainly why the prepaid segment has higher growth rates than the contract segment."
Google's Android remains by far the most popular operating system for all users, with 48 percent of both the overall smartphone base and those who acquired devices in the past three months. Apple's iPhone comes in second overall but has strong momentum with 43 percent of recent adopters.
Research In Motion's BlackBerry, in third place, has 12 percent of the market for pre-existing devices but made up only 5 percent of new purchases. The share of Windows Phone 7 devices was only at 1.7 percent, while older devices running Windows Mobile made up 4.1 percent, suggesting the upgraded platform is gaining little traction.
More Growth Seen
"Right now the iPhone and Samsung's [Android-powered] Galaxy III series are driving the innovation," said Parsons. He said the percentage of smartphones should rise to 75 percent within the next few years as prices begin to drop.
But that doesn't mean feature phone sales will dry up completely.
"That segment will become specialized, like text-centric devices or music or gaming phones such as the Sony Experia lineup," Parsons said.
Another analyst, Peter Han of Current Analysis, added that feature phones will continue to appeal to a wide range of consumers.
"This includes seniors, consumers needing an ultra-rugged phone, price-sensitive consumers, or consumers who just do not need a data plan," Han told us. "Just in the past month, AT&T, Sprint, and Verizon Wireless have all launched at least one feature phone; however, carriers have significantly decreased the shelf share of feature phones over the past year."