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Cheap rates speed up cell phone growth

Despite the push by manufacturers to arm cell phones with Web access and voice recognition, the fastest selling phones are the ones with the cheapest rate plans.

Despite the push by cell phone manufacturers and mobile software makers to arm cell phones with everything from Internet access to voice recognition, the most popular and fastest selling phones are the cheapest and simplest.

All those cell phones ringing in movie theaters, restaurants and buses mean a significant increase in the amount of wireless minutes being used in the United States. But according to a report from the International Data Corp. (IDC), the surge in usage is due primarily to new cheap service contracts and less costly cell phones.

The jump in low-end cell phone use, combined with the dramatically lower-than-expected growth of smart, or Internet-enabled cell phones, may not bode well for the tremendous industry push for more expensive wireless devices.

Software companies such as Microsoft, Palm and Symbian have been jockeying to provide software to power smart phones, convinced that this market is the next frontier for cell phone users. But last year, 774,000 smart phones were shipped worldwide, 39.3 percent less than earlier IDC predictions.

The study found that the number of wireless minutes used by the typical U.S. household jumped from 89 minutes in 1998 to 247 minutes per month in 2000. But despite the jump in minutes used, actual spending only increased by 10 percent.

Of the 900 cellular users surveyed, 19 percent said the most influential factor in the purchase was a special offer or discount, and only 15 percent purchased a phone because of fancy features.

The study found that nearly one third of households have more than two phones, with ten percent of households containing three or more phones.

"We are seeing this dramatic growth for a variety of reasons," said Charul Vyas, an analyst at IDC. "The main reason is that rate plans are becoming more affordable, enabling end users to spend more time on their phones without spending more money."