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iPhone: The Common Man's Internet Device?

Apple iPhone
Apple's iPhone isn't just for the deep-pocketed crowd. A new study reports that the popular smartphone's buyers are increasingly skewing toward lower incomes -- and helping Apple grow its user base despite the current dismal economic conditions.

While 43 percent of iPhone 3G users earn over $100,000, iPhone adoption increased 48 percent this summer among those earning annual salaries of between $25,000 and $50,000, while it grew 46 percent among those earning between $25,000 and $75,000.

The iPhone demographic study, conducted by comScore (NASDAQ: SCOR) and released this week, also found that Overall iPhone use increased 21 percent between June and August.

"As an additional budget item, a $200 device plus at least $70 per month for phone service seems a bit extravagant for those with lower disposable income," Jen Wu, senior analyst at comScore, said in a statement. "One actually realizes cost savings when the device is used in lieu of multiple digital devices and services, transforming the iPhone from a luxury item to a practical communication and entertainment tool."

The news comes as economic conditions put pressure on players in the mobile device market. Third quarter saw the industry's growth in phone shipments dropping to single digits, compared to last year's double-digit increase from 2006.

Yet Apple's (NASDAQ: AAPL) iPhone 3G appears bulletproof to the market-related issues plaguing other handset sales. Both Apple and AT&T, the iPhone's exclusive U.S. wireless carrier, reported strong earnings on the burgeoning success of the device.

In the two months following launch in July, the iPhone 3G more than doubled the total number of first-generation iPhones that Apple had sold since first introducing the device in 2007. It also outsold Research in Motion's BlackBerry during third quarter -- a feat that Apple CEO Steve Jobs called "stunning" in sharing the news with investors last week. RIM sold 6.1 million BlackBerries while Apple recorded 6.9 million iPhone sales during the quarter.

More than 10 million iPhones are expected to be sold this year, according to figures cited by both Apple and several industry researchers.

Who needs a PC?

The comScore report also aligns with a recent IBM study on how smartphones are now competing successfully with PCs for the position of consumers' chief Internet devices.

comScore said the increasing customer base among lower-income users is due to the iPhone price drop, when went into effect with the launch of the 3G model.

The iPhone 3G sells for $199 plus a two-year contract of monthly fees. At the time of its debut in 2007, the iPhone sold at a much higher price point -- $499 for a 4GB handset and $599 for an 8GB handset, both of which included a partial discount from AT&T for signing a contract.

comScore also uncovered some differences in how iPhone owners use their devices, compared to users of other smartphones. According to comScore, iPhone users earning between $25,000 and $50,000 are accessing using the Web more than ever -- an increase of 5 percent since June. During the same time, Internet activity for the entire smartphone market only grew about 3 percent, according to the firm.

Additionally, comScore found that 82 percent of iPhone users use e-mail, compared to 15 percent for the overall smartphone industry. Likewise, 85 percent of iPhone users go online for news, travel and shopping information, versus 15.9 percent of all smartphone owners.

"This data indicates that lower-income mobile subscribers are increasingly turning to their mobile devices to access the Internet, e-mail and music collections," Mark Donovan, an analyst at comScore, said in a statement.

"Smartphones, and the iPhone in particular, are appealing to a new demographic and satisfying demand for a single device for communication and entertainment, even as consumers weather the economy by cutting back on gadgets."