Smartphone carriers fighting for Phoenix market

There lies the business opportunity for cellphone-carrier giants such as Verizon Wireless and AT&T Inc., companies that will wage an intense war for customers in the next several months in metro Phoenix and around the nation.

The type of phone

The type of phone, not the carrier, typically drives consumers' decisions for which contract they sign. Today, iPhones, Androids, and BlackBerrys are driving trend. These mini handheld computers called smartphones have made once-novel text and picture messages almost passe, and the growth of the devices has made waves in the industry.

Since 2007, AT&T's exclusive contract to sell Apple Inc.'s iPhone has helped it gain market share and remain the nation's second-largest carrier despite its reputation for a poor network.

News reports and blog posts, however, speculate that the iPhone soon will be available through Verizon Wireless, the nation's largest carrier, as early as January. It could be a boost for Verizon - and brings into question how lasting AT&T's recent rise in the market will be.

Meanwhile, Sprint Nextel Corp. and T-Mobile USA are fighting for an expanded share of the marketplace. Neither carrier sells the iPhone, but Google Inc.'s Android technology, common in the phones they offer, has been drawing customers in droves. Windows Phone 7, Microsoft's newest operating system, also will be available through all carriers and has received strong reviews in advance of its launch this month.

Consumers aren't willing to give up their mobile phones, even during a recession. The average U.S. wireless subscriber used about 824 minutes per month last year, compared with 160 minutes in Europe, according to international group CTIA-the Wireless Association.

One in every four U.S. households - 24.5 percent - used only wireless phones in the last half of 2009, according to a report by the Centers for Disease Control and Prevention.

Of more than 630 wireless models in the U.S., according to CTIA, the growth trend is being driven by popular smartphones such as iPhones, BlackBerrys and, more recently, Android models.

The third quarter

In the third quarter, 28 percent of U.S. mobile subscribers owned smartphones, up 3 percent from the previous quarter, and 41 percent of those who bought a new mobile device were smartphones, according to The Nielsen Co.

Casey Thormahlen, an analyst with IBIS World, said that ever since the iPhone launched, carriers knew that consumers usually sign contracts based off which device they want, not carrier.

The iPhone saw explosive growth after its summer 2007 debut. It had 28 percent market share last quarter, according to Nielsen, which was 2 percentage points shy of dethroning Research in Motion Ltd. BlackBerry's long-standing lead. AT&T also reported a record 5.2 million iPhone activations out of a total 8 million for the same quarter.

Newcomer Android, Google's operating system that debuted in late 2008 with the T-Mobile G1 by HTC, is a prime example. Made by nearly all major manufacturers and sold by most carriers, Android eclipsed both the iPhone and BlackBerry, who nearly tied for second place, in unit sales to new users in the third quarter, Nielsen said.

Verizon iPhone will happen early next year

But with speculation that a Verizon iPhone will happen early next year, which neither Verizon or Apple have confirmed, Credit Suisse predicted last month that Verizon could gain about 4 million new subscribers next year and that roughly 1.4 million AT&T customers would make the switch.

Entner said Android would keep up, especially because consumers have their pick among different models, carriers and prices. In contrast, there's only one model iPhone on one carrier today.

Windows Phone 7, an upgrade from the Windows Mobile operating system, also should not be underestimated, said Chris Percy, vice president of AT&T's Southwest region headquarters based in Phoenix.

Consumers will also see big improvements in phones compatible with super-fast 4G networks as carriers roll them out, said Chris Nicoll, analyst at Yankee Group.

Now, most of the dealmaking is done. Smaller carriers are scarce, and because nearly everyone has a cellphone, the battle for subscribers is getting more ferocious.

Simply put, it means faster service for more complex smartphone activities. Current 4G speeds seen so far range roughly between 5 and 21 megabits per second, Nicoll said. He said 4G was largely a marketing term right now.

In Las Vegas, regional carrier MetroPCS Communications Inc. this year launched the first LTE network, which is projected to become the dominant technology worldwide.

Sprint adds a $10 monthly surcharge for those who own 4G devices - such as the HTC Evo, the nation's first 4G phone - regardless if users have access to the new network. Verizon has not yet announced prices for its LTE network.