NPD estimates total third quarter 2007 consumer sales of US$3.2 billion, which is a 47 percent increase since the same period one year ago. The percentage of smartphones sold during the third quarter increased from 4 percent of all phone sales in the third quarter of 2006 to 11 percent during the same timeframe in 2007 – an increase of 163 percent year over year.

"The mobile phone market is not only growing, it is growing smarter," says Ross Rubin, director of industry analysis for NPD. "The nearly threefold increase in smartphones shows that this once negligible niche is becoming a more influential force in the consumer market -- attracting entrants such as Apple and the Open Handset Alliance."

Many of the most popular handset features also became more common in new phones sold. In the third quarter, 72 percent of phones were sold with Bluetooth capability, which is an increase of 44 percent since the third quarter of 2006. Fifty percent of new phones were able to play music in the third quarter of 2007 (double the prior year) and 11 percent were smartphones.

The type of subscription plan that consumers have clearly influences the types of phones they purchase. When selecting a channel, most consumers with a prepaid plan choose a mass merchandiser primarily due to convenience and low prices. By comparison, consumers with no plans or post-paid plans also find convenience important, but they select channels where they have purchased phones in the past and those that boast a wide selection of phones -- which is most likely a carrier store.

"Carriers continue to be the dominant distribution channel for mobile phones," Rubin says. "However mass merchants are bringing in new customers, such as those on pre-paid plans, and wireless specialists offer a broader range of carriers from which to choose."