Cellphones Get Cheaper, So People Pay More

From New York Times:

November 20, 2007, 12:07 pm
Cellphones Get Cheaper, So People Pay More

By Saul Hansell

There’s no place that the relentless reduction in prices for technology products is more visible than cellphones. It seems like only months between the time a phone is offered for sale at $300 and it is ready to be given away free in cereal boxes. (O.K. not quite, but that’s not a bad marketing idea.)

What’s odd about all this is that according to new data from the NPD Group, people are actually spending more on cellphones than a year ago. Americans bought 38 million phones in the third quarter up only 4 percent from the third quarter of 2006. But they spent a total of $3.2 billion on those phones, up from $2.2 billion a year earlier.

Doing the math, that means the average phone cost $82.81 this year, up 40 percent from $58.95 a year ago.

NPD doesn’t say whether the extra $1 billion spent on phones in the quarter was simply added to the nation’s credit card bills or whether people cut back spending on food, clothing or something else far less important than cellphones.

But the company does show that more people are buying phones that serve other functions besides making calls. Half the phones sold in the period could play MP3 music files, compared to one quarter a year ago. Bluetooth capability was on 72 percent of phones sold, compared to 50 percent a year ago. And 11 percent were those digital Swiss Army knives called smartphones, up from only 4 percent a year ago.

Speaking of smartphones, Apple’s iPhone hit NPD’s charts in its first full quarter of sales. NPD ranks the iPhone as the sixth most popular phone model in the quarter. The top seller remains Motorola’s Razr line (in all its configurations). Second was LG’s VX8300, a heavily promoted low-price flip phone for Verizon Wireless, with Bluetooth, an MP3 player and a host of other features, I suspect most people never use.