The Apple iPhone Revolution

OCTOBER 30, 2008
Some Shed Their Gadgets by Turning to One: iPhone
By SARA SILVER WSJ

Lower-income households are turning in force to Apple Inc.'s iPhone and may be doing so to save the cost of a separate broadband connection and music devices, according to the media measurement firm comScore Inc.

A comScore study, set to be released Thursday, shows that the fastest growth in iPhone sales over the summer months came from households that earn less than the median income. ComScore noted sales to lower-income consumers accelerated since the July appearance of the iPhone 3G, which offers high-speed Internet access.

"We see that lower-income consumers are increasingly turning to mobile devices to access the Internet, to listen to music and for email," said Mark Donovan, senior analyst at comScore. "A 'Swiss-Army knife of a device' like the iPhone offers a phone, a music player, a camera and a way to connect to the Internet, which may appeal to consumers cutting back their spending on gadgets."

Ownership of the iPhone rose 48% from June 1 to the end of August among households earning between $25,000 and $50,000 a year, compared to 21% overall, the study showed. Adoption of smart phones in this segment grew 16% over that period, ahead of the market average of 12%. Mobile-browser use grew 4.9% among lower-income consumers, versus 2.7% overall, and their mobile music-listening rose 4.7%, compared to an overall decline of 0.3%. Email use, however, slightly lagged.

The study tracked changes in comScore's monthly online survey of 33,962 mobile-phone users. There were 2.6 million U.S. users of the iPhone at the end of August, which represented just 1% of U.S. cellphone users, according to comScore. The trend of rising sales and usage among lower-income consumers emerged despite a slight decline in the number of such households, which contain a large number of retired women and consumers ages 25 to 34.

While consumers have long used cellphones to substitute for landlines, U.S. telecom operators have recently also reported sharp slowdowns in the number of households adding broadband lines to access the Internet from home. Verizon Wireless, a joint venture of Vodafone PLC and Verizon Communications Inc., on Monday said it lost 96,000 DSL subscribers in the quarter.

Already, lower-income and older consumers are less likely to subscribe to broadband than average, according to a recent report from the Pew Internet & American Life Project, and 35% of dial-up Internet users cite price as the primary reason for not upgrading.

Others believe that the surge in popularity of the iPhone among lower-income consumers is related more to the decline in price to about $200. "You had this device that inspired gadget lust suddenly put within reach," said George Calhoun, a professor and entrepreneur-in-residence at the Stevens Institute of Technology in Hoboken, N.J.