Smartphones increase average price of handsets

Cell phone subscribers in the U.S. are spending more on their wireless handsets, another sign that the smartphone revolution has arrived.

On average cell phone subscribers are spending about $101 on new devices. This is $9 more than they spent on handsets just six months ago, according to a J.D. Power and Associates survey released Thursday. This is the first substantial increase in the average sale price of mobile devices in two years, the consumer survey company said.

What's driving this price jump? Smartphones and other feature-packed phones. Devices, such as Research In Motion's BlackBerry and Apple's iPhone, as well as music-enabled phones are gaining popularity. In fact, J.D. Power reports that smartphones make up about 6.3 percent of all cell phones sold today, compared to the beginning of 2007 when they made up only 1.7 percent of the market. Other market researchers have also noted a surge in smartphone growth. And because these phones typically cost more, they are boosting the overall average sale price. On average smartphones, which allow Internet browsing and a slew of other features, sell for about $208 while regular phones sell on average for about $58.

"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," Kirk Parsons, senior director of wireless services at J.D. Power and Associate.

Another indication that smartphones are impacting the market is the fact that fewer U.S. cell phone subscribers are getting their phones free from carriers. The percentage of customers who say they received a free handset has decreased from 36 percent to 33 percent during the past six months. Carriers typically have offered discounts on some smartphones, but they have not given them away for free.

Cell phone users also reported that they are keeping their phones longer. The average reported length of cell phone ownership is 17.7 months. This is up from 16.6 months in 2006. One main reason driving this trend is that as more consumers invest in more expensive devices like smartphones, they expect to keep them longer. A sagging economy could stretch this length of time even further over the next six months.

The study also revealed that more than 40 percent of respondents said style and design were the most important factors in selecting their phone. Only 25 percent said they chose their current phone because it was offered free. And 21 percent said they bought their phone because it was discounted. Only 17 percent bought a phone because of its variety of features and small size.

Sony Ericsson, which makes the Walkman music phones, ranked the highest in terms of customer satisfaction as part of the survey. LG Electronics came in second. Nokia, the worldwide leader in handset sales, still has much work to do in satisfying customers in the U.S. The company ranked near the bottom in terms of overall satisfaction.