Conventional wisdom is that iPhone users are a gadget-loving, tech-savvy and well-off bunch. In fact, results from a quantitative study of US 2G iPhone US users conducted by Rubicon in March 2008 revealed that the former have a median annual household income of $67,000 which is roughly 40% greater than the US median. So when comScore reported that the fastest growth in 3G iPhone sales in the US over the summer months came from households that earn less than the median income, it got my attention. As the attached table shows, ownership of the 3G 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. 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%. In fact, the income segment that shows the next highest growth (46%) in ownership is the $50,000 to $75,000 income category – a segment that is not too far off from the median income.
What gives? One explanation is that the lower income households are abandoning their dialup Internet access and turning to iPhone for all their broadband needs. According to a recent report from the Pew Internet & American Life Project, 35% of dialup Internet users cite price as the primary reason for not upgrading to broadband. As many as 54% of the dialup users are in the $20,000 to $75,000 household income segment – a ripe target for affordable broadband. Given that dialup Internet access on an average costs ~$20 a month,it does seem reasonable that folks would rather pay the additional $10 in data charges for the 3G iPhone and get mobile broadband in addition to a phone and a music player.
The interesting question is whether this segment of the population would be receptive to 3G mobile broadband offers from mobile operators subsidizing laptops or netbooks. If the price is reasonable, say, less than $30 a month, it is possible that these lower-income households will embrace such offers as a way to get access to broadband. The other open question is whether subscribers are cancelling their home broadband services and signing up for the 3G iPhone as a way to reduce their monthly expenses. I doubt this but it is worth further investigation especially when U.S. telecom operators are reporting sharp slowdowns in the number of households adding home broadband lines. Verizon reported that it lost 96,000 DSL subscribers in the most recent quarter on top of the 133,000 it lost in the previous quarter.