Any concerns regarding a cannibalistic impact of the iPad on Mac sales, were recently laid to rest by Apple’s Q3 2010 earnings call; the iPhone and the iPad, which run on iOS, led an impressive, best-ever, everything-but-the-iPod, sales quarter. For a closer look at who is buying two of Apple’s most popular devices, we turn to The Nielsen Company’s survey of more than 64,000 mobile subscribers, fielded April through June 2010.

It’s no surprise that iPhone and especially iPad users are trending younger or that iPad and iPhone customers report higher incomes.

Only about 15% of iPad users are more than 56 years old compared to 33% of all mobile subscribers. While we observe a typical increase in users in the 18 to 24 segment, the real shift is in 25 to 36 year-olds. The data is clear: Affluent 25 to 36 year olds are fertile ground for Apple products. As income grows, the willingness and ability to pay for more sophisticated devices increases, too. About 20% of wireless subscribers report earning more than $100,000, but almost 40% of iPad owners fall into that category. Over time, we believe those over 56 age segment could represent a significant growth opportunity for Apple.  While these baby boomers are not known as “early adopters,” they do adopt, and we should not underestimate the appeal of Apple’s products as easily and intuitively usable devices for consuming content and Internet data.

But does owning an iPad make people more or less likely to want to own an iPhone as their next mobile device? While the form factor is significantly different, the data functionality is similar. Nielsen’s research reveals that there is a clear progression in the preference for an iPhone among likely smartphone upgraders the more they have been exposed to the iOS.

Twenty-five percent of likely smartphone upgraders who have not yet owned an iPhone or iPad, indicate that they would purchase an Apple iPhone as their next smartphone. But when we asked iPad owners who do not have an iPhone this same question, this number more than doubled to 51%. Clearly, exposure to Apple’s iOS creates a very positive pre-disposition to purchasing an iPhone. We see the same effect when comparing current iPhone owners, of whom an industry-leading 85% indicate that they would purchase another iPhone as their next smartphone. And a whopping 91% of likely smartphone upgraders who already own both an iPhone and iPad want an iPhone next.

By creating a whole universe of devices and form factors around iOS – all with the easy-to-use interface design Apple is known for — Apple has created a mutually-reinforcing ecosphere that attracts new customers, and convinces them of the virtues of Apple. Being able to share the same applications they purchased on all their other devices free of charge , leads consumers to add more devices from the same universe – and effectively retains them as upgrade customers. Customers have also the added benefit of being able to share the same applications they purchased for one iOS device (iPad, iPhone, iPod) on all their other devices free of charge.

The advent of connected devices, including the iPad and other tablet computers, eReaders like the Kindle and Nook, netbooks, and media players, is clearly changing how consumers engage with media.

AT&T’s shift away from unlimited data pricing has led us to examine the issue of data consumption in the United States. The Nielsen Company collects phone bills from more than 60,000 mobile customers every month and analyzes every line item on the bill. These bills show how much data each customer has consumed in the previous month, regardless of whether the customer is on a metered or unlimited data plan, in order to give customers the opportunity to understand their data consumption habits.

When we look at smartphone data consumption distribution and year-over-year change, we see a large disparity of usage among smartphone users and are struck by the staggering amounts of data used by the heaviest users.

Average data consumption increased from about 90MB per month during the first quarter of 2009 to 298MB per month during the first quarter of 2010. This represents a year-over-year increase of approximately 230 percent. While this increase is substantial, in the first quarter of 2009 more than a third of smart phone subscribers used less than 1MB of data per month; this number has dropped to a quarter in the first quarter of 2010 as the number of applications and the utility of smart devices has increased substantially. That means about 20 million current smartphone users are hardly using data.

Other conclusions:

1. Usage-based pricing may be more fair. The top 6 percent of smart phone users are consuming half of all data. The vast majority of customers, 99 percent according to the 60,000 phone bills that Nielsen collects and analyzes every month as part of their Customer Value Metrics product, are better off with a pricing scheme like AT&T’s new data pricing model than under flat-rate pricing where they are paying for much more than they ever use.
2. There is a growing need to educate smartphone users. With about 23 percent smartphone penetration in the United States, we are still in the early adopter phase. A quarter of these early adopters are not using their device for data services at all. They use exactly zero MB per month. For some reason these customers have purchased a miracle in engineering and technology that has more computing power than what was used to get men safely to the moon and back and yet they only use their smartphone for phone calls and text messaging. Operators have to do a much better job in conveying the value and utility of these powerful devices–and to marrying the right device to the right customer. The more suitable the device is to the usage and spending pattern of the customer the more satisfied the customer will be.
3. More than a third of smartphone users have not yet signed up for a data plan. Most of these smart phone users were among the first to get these devices, before operators required a data plan be added to the device subscription. Over time, these device owners will get converted into paying customers for data, but it is critical for the long term success of the industry to not only collect revenue but to also provide and convey value.

The industry has its work cut out for itself as it undergoes its most revolutionary shift to a post-voice-centric world. The priorities of large swaths of customers are shifting. Some operators have been better than others in adapting to the changing industry landscape and have been able to capitalize on it. As this trend continues, voice calls are increasingly commoditized and the average revenue per user on voice has been falling. Operators with the right cost structure will still be able to operate efficiently, effectively and profitably in this increasingly challenging voice segment, but most operators are condemned to sink or swim in the new data-centric world.

The World Cup, the most popular sports event in the world, is upon us again.  While the importance Americans attach to this event is small, the rest of the world literally views it differently, and for the first time mobile devices will play an important part in how people follow the game.

More nations (208) participate in the World Cup’s qualifying tournaments than in the Olympics (205) or the United Nations (194). The World Cup has been a flashpoint in war (as in the 1969 “Soccer War” between Honduras and El Salvador) and wars have been halted to allow combatants to watch mere exhibition games (albeit with soccer great Pele and the Brazilian National Team) like during Nigeria’s civil war also in 1969. Despite revelry in the streets, crime rates are said to drop during the games in many countries because even the crooks are glued to their TV sets.

And now, the Beautiful Game, or joga bonito as the Brazilians say, is coming to mobile.

When asked how they intend to follow the World Cup, fans chose mobile with surprising regularity. Globally, 21% said they would get at least some of their information from the Internet via their mobile devices and 9% said they would get it through applicationa on their phones.

Latin America is one of the most soccer-crazed parts of the world, but interest in following the tournament via mobile is different from country to country. While the interest in the World Cup is almost equally high in Argentina and Brazil, Brazilians are twice as likely (21%) to get World Cup information from their phones as Argentines (10%). But neither country comes close to Venezuela, where 27% of respondents say they’ll be following the games on a mobile device. In North America, 23% of U.S. respondents, but only 11% of Canadians, will check up on the World Cup via their mobile phone.

Throughout the rest of the world, interest in World Cup information via mobile is also strong. In every country that we surveyed in the Middle East and Africa, between 22% and 30% of respondents planned to use mobile as one of the ways to get information about the World Cup. The numbers in Europe were lower with Ireland showing the most mobile interest (18%). In big European soccer nations like Germany and Spain, only 3% of respondents said they’d use their mobile phones to get information about World Cup games.

Where it gets really interesting is with TV usage: live TV broadcast and mobile Internet access were moderately negatively correlated (-0.46), indicating that the less likely you are to watch the TV live broadcast the more likely you are to seek out the information with your mobile phone. At the same time delayed broadcasting/highlights was completely randomly correlated (-0.03) with using Internet on the phone to find out about the World Cup. This indicates that people want to know about the games immediately and not get rid of the television viewing experience.

Roger Entner, Senior Vice President, Research and Insights, Telecom Practice

Traditionally, Americans have bought their mobile telecom services first by picking their voice option, then by choosing between prepaid and postpaid paid plans and determining the number of voice minutes they think they’ll need. Finally, they select from various service add-ons such as messaging options, mobile internet access, device insurance and even roadside assistance. But, voice calling has always been the anchor service.

All that may change as texting rises in popularity and voice usage remains flat or declines. According to Nielsen’s Customer Value Metrics research, which analyzes the wireless services bills of 60,000 mobile subscribers nationwide, 18 to 34-year olds have increased their text messaging from 138 messages/per month to 845 messages/per month between Q1 2006 and Q4 2009. During that same time, their voice minutes decreased from 1,094 to 943. This massive increase in mobile messaging gives carriers the opportunity to create products and pricing plans with text messaging (not voice) as the anchor product.

Last week’s launch of the Virgin Mobile Unlimited Messaging plans is just the first wave of many similar offers to come. These new offers recognize the paradigm shift in how consumers use their mobile devices. When there is a significant customer segment for whom texting is front and center and voice a mere afterthought, carriers have the choice of embracing that segment or missing out.

This is neither the first nor the last product anchor and product packaging innovation. As we penetrate previously uneconomic customer segments with better product and service packages, the revenue from these marginal segments will also drop.

At the same time, carriers can unlock new revenue segments. AT&T’s no-contract iPad data plans and the integrated eBook reader downloads where the transport is bundled into the price are a harbinger of the multi-connection world we will be living in. Both are possible due to lack of subsidies and low-cost billing methods.

By giving these customers the right services and products to fit their needs, carriers could be moving us closer to a multi-carrier relationship model where the carrier becomes less and less relevant. Hypothetically, a customer could purchase voice communications from one carrier, buy a text messaging-centric plan for their teenager from another carrier, and use different carriers for their mobile tablet and their wireless dog collars. That is the likely scenario unless there are more compelling reasons to bundle. While the proverbial “connected” pill bottle is a potential revenue source for one operator, it won’t become a source of profit without the right customer acquisition and service model.

The only way operators can take advantage of these paradigm shifts in the long run, is to switch from selling products to offering total communications solutions, especially for families. As we move from subscriptions to connections as a measure of size for carriers, it becomes uneconomical and wasteful to chase every connection as a subscription, especially when the value of the marginal connection drops in value. Instead, carriers should sign up families (or other economic or legal units) for comprehensive data services across all connections. In a 4G flat-IP world, where voice is just another application, households and businesses want a data “bucket” they can use to view any content they want (internet, music, video, or games) on any device they own.

As the advertising, Internet, and mobile worlds rapidly converge, we need to shift how we look at these various industries and the metrics we use to describe the potential business. What is essential is a different, unified mindset of how to evaluate the opportunity and to compare the various components of the customer value stream.

The giants of the computing and Internet world have provided the mobile advertising ecosphere the legitimacy it was looking for through the acquisitions of Admob by Google and Quattro Wireless by Apple, and the subsequent launch of iAd. Now, we need a better understanding of the revenue opportunities.

Pure valuations or even revenue figures provide only limited insights into the true performance of a company. In the mobile world, ARPU or average revenue per user, is a commonly used metric to compare the various revenue opportunities regardless of the size of the underlying carrier.

ARPU is calculated by dividing quarterly revenues by three to get monthly revenues and then dividing the monthly revenues by the number of subscribers or unique users.

We used Google-owned site revenues because we can determine a unique user count, which we cannot do for the source of the vast majority of the remaining revenues from AdSense.

Now everyone agrees that mobile is at least as attractive as an advertising platform as the Internet. Your cell phone is always with you, is more personal than any other device, and has the ability to integrate location and immediacy. Furthermore, mobile advertising is becoming less hampered by the limitations of the device in terms of screen size and network speed and the difference between the Internet and mobile experience is becoming less and less. At the same time, we are at the very beginning of location-based advertising, couponing or even simple things like dropping a previously opted-in voicemail into our mailbox.

This brings us back to mobile advertising. If mobile is as good or better than the Internet as an advertising vehicle, it is also able to monetize it at least equally well. Google gets $9.40 per month per unique user in revenue from advertising to Internet users. They should be able to get at least the same per month for a mobile customer that uses the device longer, more often, more intensely, and more personally than the computer and the Internet. If we take $9.40 and multiply it by 280 million wireless subscribers in the U.S., the mobile advertising market potential is more than $2.5 billion per month or more than $30 billion per year. Think at least 30 billion reasons why Google wants to buy AdMob for $750 million, at least 30 billion reasons why Apple bought Quattro Wireless for $360 million, and at least 30 billion reasons why others will want to participate in this space – and this is just 30 billion reasons why to do it in the U.S., let’s not forget about Europe, Asia, Latin America, Africa, and Australia.

This article also appears at Fierce Wireless

The iPhone, Blackberry, Droid and smartphones in general dominate the buzz in the mobile market, but only 21% of American wireless subscribers are using a smartphone as of the fourth quarter 2009 compared to 19% in Q3 2009 and 14% at the end of 2008. We are just at the beginning of a new wireless era where smartphones will become the standard device consumers will use to connect to  friends, the internet and the world at large. The share of smartphones as a proportion of overall device sales has increased to 29% for phone purchasers in the last six months and 45% of respondents to a Nielsen survey indicated that their next device will be a smartphone. If we combine these intentional data points with falling prices and increasing capabilities of these devices along with a explosion of applications for devices, we are seeing the beginning of a groundswell. This increase will be so rapid, that by the end of 2011, Nielsen expects more smartphones in the U.S. market than feature phones.

The Smartphone User
Slightly more males than females are getting smartphones (53% versus 47%) which is what we would expect for technical early adopter products. In terms of demographics, Hispanic Americans and Asians are slightly more likely to have a smartphone than what their share of population would indicate, which is a trend we see in the adoption of other mobile data services. While smartphones started out in the business segment, two-third of today’s buyers of smartphones are personal users.

Loyalty
In the last six months, roughly 77% of new smartphone buyers remained loyal to their wireless operator, while 18% switched to a new provider to get their new smartphone with the remaining percentage made up of first-time smartphone buyers. Interestingly enough, the percentage of people who switched carriers and got a new smartphone is not higher than that of the average wireless subscriber.

This indicates that the portfolio of the wireless carriers in general is robust enough to prevent any wide-spread smartphone flight from one carrier to the other, with very few exceptions. The added bonus for wireless carriers is that smartphone owners are significantly more satisfied (81%) with their device than feature phone owners (66%).

Features, features, features
Smartphones show higher application usage than feature phones even at the basic built-in application level. During Nielsen’s Mobile Insights survey we asked the respondents about features they’ve used in the last 30 days. The good news for the smartphone market is that people are actually taking advantage of the device capabilities.

The percentage of people who use their phone for only voice communications drops from 14% among new feature phone owners to 3% of smartphone owners. The use of the built-in camera and video capability jumps by almost 20% for both categories, due to the generally better quality and user friendliness of the features. Smartphones also often have a better speaker which translates into more frequent usage from about half of feature phone owners to about two-thirds of smartphone owners. Not surprisingly the use of Wi-Fi increases 10-fold from 5% for feature phone owners to 50% for smartphone users to satisfy the need for fast downloads.

The anecdotes documenting the love affair between teenagers and texting are countless. Many parents can attest that their offspring text rather than talk, even when they sit next to each other in the back of the car. Their children text in the morning before they brush their teeth and continue late into the night with the last text messages, also called SMS, sneaked in under the covers right before they close their eyes to sleep. Until now, there has been very little firm data available about how pervasive texting has actually become among the under-aged.

Source: Nielsen CVM, Q3 2009

Nielsen analyzes more than 40,000 mobile bills every month to determine what consumers actually are spending their money on. The results are staggering: American teenagers are using 3,146 messages a month, which translates into more than 10 messages every hour of the month that they are not sleeping or in school. Even the under 12 segment are sending 1,146 messages per month, which is almost four text messages per waking hour that they are not at school.

While the 13-17 year old age bracket is already highly saturated, the last holiday season was good to the under 12 segment when it came to text messaging. A full 8 percent increase in SMS usage was measured combined with a near doubling in text message volume for that segment in the following quarter (Christmas, Hanukkah, and Kwanzaa are late in December, so usage increases will be recorded in Q1).

There has been a lot of discussion regarding the cost of texting, mainly driven by the increasing individual per message price. Looking at the same bill panel we can see that only a very small percentage of people who text message are doing so on a pay-as-you-go basis at the 20 cent per message rate with the vast majority of users subscribing to plans. When we actually incorporate the effect that the significant uptake of messaging bundles has on the actual price that customers are paying for each text message, we find that wireless customers are actually paying only 1 penny per message.

Source: Nielsen CVM, Q3 2009

The text messaging market in the United States is very similar to the newspaper or magazine market. For example, the Wall Street Journal’s newsstand price is $2, but if you subscribe to the Journal, it is $119 per year–a whopping 80 percent discount. For People Magazine, the cover price is $3.99 while the annual subscription is 47 percent off at only $2.09 an issue, a great deal if you are subscribing. For text messaging, the discount is more than 95 percent, due to the heavy prevalence of large texting bundles. What is even more interesting is that from first quarter 2008 to third quarter 2009, the effective price of a text message has decreased by 47 percent.

After all the negative publicity that text messaging has received, a look at the facts is showing quite a different picture. When one takes into account usage, text messaging is very affordable and cheaper than ever before, especially when compared to various European countries where texting has been widespread for years. While U.S. carriers offer unlimited texting for between $10 and $20 per month (if it is not already bundled into the plan), not every country in Europe is as competitive as the United States. For example, Germany, the largest European market, wireless providers charge about €25 for between 300 text messages and 30 MMS and up to 3000 text messages per month.

Overall, text message usage is also expected to grow as the heavy text messaging population ages and entices the older generations to text with them in order to stay in contact with them as any parent of a teenager can probably attest to. The average text message number has increased every year, but the huge room for growth that is still remaining has been underestimated given the penchant for texting among the 17 and under segment.

FCC Chairman Julius Genachowski laid out his priorities for the wireless industry at the CTIA IT event last Wednesday. He wants to:

• Bring more spectrum to market to handle rapidly increasing demand for wireless data
• Remove red tape to allow wireless carriers to expand networks faster
• Conduct the regulatory process at the FCC more openly and on a fact-based, data-driven basis
• Codify and enforce net neutrality with special considerations to wireless

I am sure the wireless industry is welcoming the first three priorities of the new Chairman. They represent a welcome and overdue recognition of the situation we are in – more than 270 million American wireless subscribers and more than 42 million of them using smartphones to access the Internet. While the discussion continues about the need for the codification of net neutrality for wireless, it is very encouraging that Chairman Genachowski has recognized that wireless networks deserve special consideration.

Some examples:

1. Wireless data networks that are available to most Americans have only modest throughput.
   Today’s technology allows CDMA network operators (Verizon Wireless and Sprint) to provide a theoretical maximum throughput of 2.4 to 3.1 Mbit/sec and UMTS carriers (AT&T and T-Mobile) a combined theoretical maximum of 3.6 Mbit/sec. For simplicity sake, let’s assume the throughput of a particular cell site sector to be 3.6 Mbit/sec. This theoretical maximum is achievable if only one person uses the cell sector and is standing next to the antenna. The farther the person is from the tower or the more mitigating circumstances there are in between, ranging from interference from other sectors to mundane circumstances like leaves on trees, the less throughput available to an individual.
2. Wireless networks are a shared resource.
   The throughput is shared among all people actively using the network at any point in time.
3. Adding capacity is not always possible due to limited spectrum availability.
   Unlike wireline, where you can always put another fiber cable in the ground or light up another strand of fiber already laid, wireless service providers can’t manufacture more spectrum.

For most applications this does not pose insurmountable problems because a subscriber uses the bandwidth for only a short period of time, the duration of a call or while loading a web page. Such usage patterns are easily sustainable on current networks and are generally described as “bursty” traffic.

Complications start when we move from bursty traffic to streaming. With streaming, a constant amount of throughput is needed by the subscriber to maintain the connection and enjoy a satisfactory quality of service. The constant throughput cannot be used by anyone else. Streaming audio from an application like Pandora or Rhapsody typically uses about 40 kb/sec and can support around 90 concurrent users (a theoretical best case scenario of 3.6 Mbit/second divided by 40 kb/sec) in a cell sector. Wireless carriers allow and even sell streaming audio, which would indicate that there are significantly fewer than 90 concurrent listeners in a cell sector.

It gets difficult when the mobile subscriber uses streaming video in general and with an uncapped video frame rate in particular. Take the Slingbox, a popular device that lets people watch their home television service away from home on a laptop or mobile device. The quality of the picture depends on the uplink speed from their home Internet provider (between 384 kb/second and up to 10Mb/second) and on the download speed of their wireless carrier., In the best case scenario nine people (3.6Mbit/second divided by 384kbit/second) can watch TV concurrently via their Slingbox, effectively preventing any other activity. Without the ability to manage the amount of throughput allocated to these nine individuals, other mobile users in the sector will be out of luck. Currently, wireless network operators do not throttle data throughput, but this exposes them and consumers to a negatively impacted user experience caused by only a few heavy users. Traffic shaping could safe guard against the general slowdown of the data throughput in a cell sector for every consumer, but negatively impacting the viewing pleasure of nine subscribers to enable all users in the sector to receive service. This dynamic, real-time dance of RF engineering would be a forbidden under a purist net neutrality approach.

Another implication of a purist net neutrality rule that would negatively impact wireless subscribers’ service is if one person uses their wireless modem to power their web server – and yes it has happened.

How big is a cell sector? Anywhere from the size of the city block that houses Madison Square Garden in Manhattan, to the size of Capitol Hill in Washington DC to several square miles of corn fields in rural Nebraska.

Considering the relatively fragile nature of RF networks and the reasonable expectation of a majority of subscribers that they can make and receive calls and download the applications they are paying for, it is only a matter of fairness to the majority of wireless consumers that carriers be permitted to allocate network throughput in a fair and equitable manner among all customers.

Over the past few months, the government’s interest in the practice of handset exclusivity has intensified. On the heels of Congressional hearings in July, Verizon Wireless agreed to dial back its exclusive deals with cell phone manufacturers to accommodate smaller carriers. This week the FCC, which has already begun a review of handset agreements, has made the issue a focus of its regular monthly meeting. But no matter what the setting or circumstances, whenever U.S. lawmakers and regulators discuss competition in the wireless industry, the elephant in the room these days is almost always the iPhone.

Since Apple first gave AT&T exclusive rights to carry its groundbreaking device in the United States, concerns about unfair competitive advantages have become a hot-button issue. Apprehensions increased as AT&T sought to extend the deal beyond the 2009 deadline, and reached a fever pitch when Apple rejected a Google Voice application earlier this summer.

Nonetheless, many both inside and outside the industry question the need for more government intervention.

Indeed, before the iPhone came along, far fewer consumers (or lawmakers and regulators for that matter) cared a great deal about handset exclusivity, because most cell phones were utilitarian at best. According to Nielsen’s Mobile Insights report, which surveys 300,000 wireless users every year about their opinions and behaviors, in Q3 2006 – a full year before the iPhone launched – “device” was only the seventh most important factor in choosing a wireless carrier. The percentage of respondents on device has since increased from 2.9% to 6.4% in Q1 2009, yet the category remains in seventh place.

There is no doubt AT&T has benefited from the arrangement. New subscribers between the first quarters of 2008 and 2009 who signed up for “a phone not offered by my carrier” (i.e., the iPhone) jumped from 11% to 23%, and the company has reported that 40% of its iPhone customers switched from other services.
Still, the mobile industry is home to many operators who sell a wide variety of handsets. Currently, there are more than 100 different phones offered by the nation’s “Big 4″ service providers in their retail store, plus hundreds more from the large carrier’s websites and the more than 100 smaller carriers that are operating in the United States.

Even if every handset were required to be accessible across all four networks, only the largest of manufacturers could invest in the infrastructure necessary to produce identical products with different technologies. Neither legislation nor regulation could nor should be expected to change that situation.

It can be argued that exclusivity actually enhances innovation and creates more choice. If, for example, Apple’s iPhone or Motorola’s RAZR were initially available on all U.S. carriers, there would have been minimal incentive for handset manufacturers to create rival products. Though competition would exist, the options would be considerably less diverse.

What is more, the iPhone’s significant technological lead over virtually every other smart phone would probably have virtually destroyed the market for the other handset manufacturers. T-Mobile, like several other carriers, would have had less reason to invest in the development Android-based devices. Palm would not have been able to build the Pre and sell as many as it did in the first few weeks without the support of Sprint. In fact, Palm would have likely died without the Centro, which was custom built for Sprint under an exclusive pact that has since expired.

Beyond the iPhone’s distinct technological advantages, AT&T’s infrastructure would almost certainly limit competition as well. Early on Apple had decided to build its phone on a GSM technology path, the most popular standard for mobile phones in the world. But in the United States there are but two GSM networks – AT&T and T-Mobile. Were the iPhone originally available on both, consumers would pick their carrier based largely on price and coverage. Since pricing can be easily matched, T-Mobile’s nascent footprint would have a hard time going up against AT&T’s more built-out network.

In time – perhaps as early as next year – Apple will likely drop its AT&T exclusivity and build an iPhone in the U.S. that can be used across other wireless technologies. That is about to happen in Europe, where the company is reportedly moving away from exclusive deals because it can now derive greater profitability by not having restricted relationships with only single providers. At that point, new and current iPhone users will migrate to carriers that makes that the most sense for them – still driven by the factors other than “device.”

A version of this article also appeared at FierceWireless.com.

While public awareness of Apple’s iPhone has been significant since its summer 2007 launch, its influence on consumer purchasing decisions remains up for debate.

To try to better understand the iPhone phenomenon, I took a look at the most recent data from The Nielsen Company’s Mobile Insights survey, which asks 25,000 wireless users every month (a total of 300,000 per year) about their wireless attitudes and experiences, including why they chose their current wireless service.

When the results of 1st quarter of 2009 are compared with the 3rd quarter of 2006 as a control for the “iPhone-effect,” some interesting insights emerge. Q3 2006 was the last quarter without solid iPhone news that could sway consumers in their purchasing behavior.

At first glance, the most striking difference between 2006 and more recent data is what changed and what did not. Price remains the most important factor in choosing wireless service. Yet, even with the prominence of the iPhone, surprisingly the availability of a specific phone stayed flat as the 7th most important factor. While increasing in importance from 2.9% to 6.4% handset-choice alone did not bump up in the rankings. It seems that what makes for an outsize share of newspaper headlines, and congressional and regulatory attention, leaves the average American cold.

Not as surprising, economic factors are increasingly important. Family plans that let consumers call other family members for free and free in-network calling have shot up to near the top. Payment options, including pre-paid and unlimited calling and texting offers, are also substantially more important.

This translates into opportunity for:

• Pre-paid providers such as Tracfone
• Unlimited providers Boost Unlimited, Metro PCS, and Leap, each who offer unlimited calling and texting for as low as $40 per month
• The two largest wireless operators in the U.S. Verizon Wireless and AT&T due to the larger free calling circles

Perhaps the most unexpected outcome is the declining importance of network quality as a major factor from 2nd to 5th place. A testament to the success of its consistent advertising message, the number of consumers who perceive Verizon Wireless as having the best mobile network has shot up over the last two years and it leads its closest competitor now by an almost 2:1 margin. Consumer perception of the carrier’s quality has shot up over the last two years and it remains the single-most important reason consumers choose them. While handsets represent popular topics of conversation, economic factors are actually the major driver in the purchasing process.