• by Mark Walsh  @markfwal, November 10, 2008

The iPhone 3G deposed Motorola's Razr as the most popular mobile phone in the U.S. during the third quarter, according to market research firm NPD Group. It marks the first time that a smartphone has become the top-selling consumer phone, and the first time in three years that the Razr has been bumped from the No. 1 slot.

The iPhone's gains, however, were not enough to lift overall phone sales in the quarter, which fell by 15% compared to a year ago to 32 million units. Handset sales revenue dropped 10% to $2.9 billion, even while the average selling price increased 6% to $88.

The decline could be a harbinger of things to come in 2009 as the deteriorating economy forces budget-conscious consumers to consider mobile expenses more closely.

For Apple Inc., however, the most recent quarter was cause to celebrate as iPhone sales totaling almost 7 million units helped power the company's 26% profit gain. AT&T, the exclusive iPhone distributor in the U.S., also benefited, selling 2.4 million of the devices in the quarter.

Ross Rubin, director of industry analysis for NPD, called the iPhone's displacement of the Razr, "a watershed shift in handset design from fashion to fashionable functionality." He added that a 3G smartphone becoming the top-selling phone also "signals growing consumer interest in accessing the Web on the go."

A study by M:Metrics in July found that 80% of iPhone owners use the device to browse the Web, compared with 32% for all other smartphone users.

But feature phones still account for the bulk of handset sales. LG, which doesn't sell any smartphones in the U.S., for example, had the fourth- and fifth-best-selling phones with its Rumor and enV2 models. The BlackBerry Curve was third behind the Razr.

"Clearly, it's not yet a requirement to have a leading smartphone or portfolio smartphone to do well in the U.S. market," said Rubin. Nevertheless, more would-be iPhone killers are on the way, with the recent debut of T-Mobile's G1 "Google" phone and the impeding release of Verizon's Storm from BlackBerry.

The buzz around these new entrants coupled with continued strong performance for the iPhone could lead to improved phone sales in the fourth quarter, said Rubin. But the tightening consumer spending could slow sales for high-end phones in the coming year.

"Looking forward to 2009, economic conditions will force consumers to think very carefully about adding the monthly expense of the data plans that you really need to make the most of a lot of these advanced devices," said Rubin. For voice-centric users, there isn't much incentive to upgrade, he added.