"This shift could happen much faster with the right conditions such as continued competitive price points on devices, lower 'all you can eat' data packages and the increasing consumers who need to be connected anytime, anywhere," according to a post Wednesday on the Nielsen blog by Jerry Rocha, senior director of the online division.

In just the third quarter of 2009, Nielsen estimates that smartphones accounted for 40 per cent of new phones sold in the period, up from 25 per cent in the prior quarter. And in the third quarter, for the first time, more people accessed the Internet from smartphones than regular phones. "If this trend continues, we'll see more than 80 per cent of the devices accessing the Internet being these advanced phones," wrote Rocha.

Assuming that 150 million people will be using smartphones by mid-2011, that means 120 million will be on the mobile Internet and 90 million, or 60 per cent, will be watching video, according to Nielsen projections based on current data trends.

As of the second quarter, Nielsen has previously reported that some 15 million U.S. mobile subscribers watch video on their phones for an average of three hours, 15 minutes each month.

With the launch of the Motorola Droid by Verizon Wireless last week, Nielsen also compared data and Web usage between the iPhone and Android devices. The results were roughly even, with 92 per cent of Android users accessing the Internet compared to 88 per cent of iPhone owners, and 76 percent of Android customers using applications versus 74 per cent on the iPhone. Given Apple's 10-to-1 advantage over Android in the number of mobile apps offered, the parity in usage should be welcome news to Google.

When it comes to watching video, Android had a clearer edge over the iPhone, at 47 per cent to 40 per cent. But iPhone and Android users separately outstripped smartphone owners overall in Web browsing, video viewing and using apps.

While Nielsen didn't weigh in on whether the Droid was shaping up as an iPhone-killer, it argued that the new Android phone will help accelerate adoption of the mobile Web and content, especially of popular Google programs like Gmail, Google Calendar and Google Voice.

"The trend in the U.S. is more interaction, more consumption, and more connected devices," wrote Roche. "While not a competition killer, the Droid is the next logical step in a market with a wide array of rich media devices."
 
“Mobile phone vendors must invest in their smartphone portfolios to benefit from the fastest-growing segment of the market and that which is most resistant to low ASPs,” Milanesi said. “They should also focus on winning developers and carrier support which will both attract users.”