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US smartphones – Once you’ve had Android there’s no going back

Looking to the future on the verge of 4G

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Opinion Most people that we meet who are not in technology, wonder at how we keep up with the speed at which technology changes. But technology – and technology markets in particular – are sometimes glacial in the speed of change.

Back in around 2002, when we first talked about 3G licences, and ooh-ed and ahh-ed at how much money they cost to buy, we thought the world was about to begin a ramp up in smartphones. It didn’t.

But now almost eight years later, we begin to see what all the rhetoric was about back when the licences were issued, just as we are on the verge of 4G investment. It’s strange that the US, which was light years behind Europe, which itself was light years behind Japan, is now the hotbed of change where this innovation originates.

Partly this is due to the fact that in the US, like in Japan, handset control is more firmly in the hands of operators rather than consumers. In Europe, operators tend to take a wider variety of handsets, and let the consumer decide.

There are plentiful retail operations which are independent and which are not owned or controlled in any way by the operators, and they sell a huge chunk of all contracts. In the US, the operator-owned stores and the rivalry between operators, means that fewer phones have large chunks of advertising money pumped specifically into them, and they are "hyped" on an unsuspecting public.

But another reason for US dominance is the passion with which US individuals take up Social Networks. This is what is driving data usage and the need to have these experiences integrated onto handsets, so they can be engaged in continually.

A report this week from Nielsen shows just how much acceleration towards smartphones the US has generated. Already it is now 28 per cent of the US cellphone market, defining smart phones as cellphones with operating systems resembling those of computers.

nielson chart

Image from Nielson Mobile Insights

But what is really interesting is the rate at which new contracts or phones are being acquired which use a smartphone. Over the past six months this has risen to 41 per cent of all people getting a new phone.

The US was the country where the mobile phone was invented, but Europe created the first widely accepted standards and dramatically overtook the US in handset penetration and usage during the 1990s. This jump in smartphones already puts the US back on track with the UK, says Nielsen, but it points out that in Spain, smartphones' penetration is already as high as 37 per cent and in Italy it is 33 per cent. The difference is that Symbian is still driving these experiences.

Brand loyalty

What that means in turn is that brand loyalty, in particular to Nokia and probably Sony Ericsson as well, is holding up – for now. This is most likely a simple case of the UK having had longer contracts for longer, and there not being enough new handset contracts being signed to overturn feature phones and focus on smartphones. The operators in the UK are stingy and have always tempered attracting new customers with deals that tie them in for longer.

The complexion of the US market is also exceptionally revealing and the graph below shows that the only OS in the US which is dramatically changing its position is Android. The Apple iPhone OS is in the act of catching RIM Blackberry OS, with 28 per cent and 30 poer cent market share respectively and Nielsen puts Google’s Android OS on 19 per cent. At its current rate of growth, one or two quarters will be needed before it is out-and-out the leading OS there.

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