• by Mark Walsh  @markfwal, August 19, 2009

Regular mobile phones are taking on more and more of the advanced features of smartphones as they strive to compete with the growing popularity of high-end devices like the iPhone and BlackBerry.

In its latest mobile-tracking report, market researcher NPD Group points out that feature phones -- which don't have operating systems or offer the same range of functionality as smartphones -- still account for the vast majority of U.S. mobile phone sales, with 72% of the market in the second quarter.

But that commanding share is down 5% from a year ago, while smartphones increased their market share to 28% -- a nearly 50% jump from a year ago. The spread of smartphones, accelerated through the cutting of prices on models like the iPhone 3G and BlackBerry Storm to $99, has put growing pressure on handset manufacturers to upgrade feature phones to remain competitive.

That has led regular phones to increasingly adopt features such as touchscreens, Qwerty keyboards and WiFi capability to blur the distinction with smartphones. More than a quarter (26%) of all handsets bought in the second quarter had a touchscreen and 35%, a Qwerty keyboard.

But NPD analyst Ross Rubin noted such hardware improvements will not be enough for regular phones to make everyone forget about smartphones. "Although their user interfaces continue to improve, the depth of their applications generally lags behind those of smartphones," he said in a statement.

"With the price gap between smartphones and feature phones narrowing, to remain competitive, feature phones need to develop a better Web experience, drive utility via widgets, and sidestep the applications arms race." Easier said than done for the phone makers.

For the quarter, the LG enV2 and Samsung Rant were the top-selling feature phone sales, while the iPhone 3G and BlackBerry Curve led smartphones. The average selling price of all mobile phones increased 4% in the last year to $87. Overall handset unit sales in the U.S. grew 14% in the quarter as revenue increased 18%.

According to a Gartner report issued last week, worldwide mobile phone sales dipped 6% in the quarter even as smartphones sales jumped 27%.