In 2007, when Apple released the iPhone, its big touch screen made it an instant hit. The phone operated exclusively on AT&T’s wireless network in the U.S., and other network providers implored their phone makers to quickly devise competitors. The scramble was on, and the touch-screen alternatives blossomed during the 2008 holiday season. Suddenly available were Research in Motion’s Blackberry Storm, which operates over Verizon’s network, HTC’s G1 (T-Mobile), the Samsung Instinct (Sprint), and others—most retailing for about $200.

Each of these offerings can be called a smart phone, which generally means the technology is robust enough to provide a range of services beyond cell phone calls and text messaging and often means the operating system is open to third-party software developers seeking to create more novel features. The smart phones increasingly communicate over so-called 3G cellular networks that allow faster Web browsing and sending and receiving of e-mail. But the touch screens are the primary consumer draw. “Every provider now has a showcase phone that it is promoting heavily, to try to compete with the iPhone,” says Ross Rubin, director of industry analysis at NPD Group, a market research firm in Port Washington, N.Y.

The handsets are crammed with hardware such as digital photograph and video cameras, music players and the dandy screens. The devices may soon evolve into small computers about the size of a clutch purse. Hewlett-Packard and others have begun offering such “netbooks” with 3G Internet capabilities; cell phone service is expected soon.

Smart phones pack an incredible array of telecommunications capabilities, including e-mail messengers, Web browsers, GPS navigators and, oh, yes, the actual cell phone. And more is to come. “There’s plenty of gas left in the 3G network,” Rubin points out. Eventually, though, the promise of delivering mobile broadband—equivalent to the DSL or cable service most people now enjoy at home—will require an evolution to 4G, which is already being planned under the monikers of LTE (AT&T and Verizon) and WiMAX (Sprint).

When 4G rolls out, carriers might finally open their wireless networks, so consumers could buy phones from different manufacturers that operate on various networks, whether AT&T’s or Verizon’s. The phones would probably be more expensive, because the carriers would not be subsidizing them to lock consumers into a two-year service contract. “You would just pay for monthly or even daily service,” Rubin predicts, “with no penalty for switching.”

Did You Know...
SHAKE IT: Accelerometers have been embedded in touch-screen phones to track when users turn the screens from “portrait” to “landscape” orientation. But their inclusion is allowing new applications, too. When the iPhone displays a list of nearby restaurants, shaking the phone will reorder the entries; the accelerometer can also instruct the camera to take a photograph at night in low light only if the phone is being held steady.

MIDS: Mobile Internet devices, or MIDs, are garnering more interest, as touch screens make cell phones bigger instead of smaller. MIDs are perhaps twice the size of touch-screen phones and are optimized for one function, such as a video camera that can wirelessly upload to the Web, or a mobile video-game console that allows people roaming around the world to play against one another. Intel Corporation is pushing the MID concept and name in part because the company makes a processor called Atom that can drive such devices and is already in very small “netbook” computers optimized for Web browsing.

Note: This article was originally printed with the title, "Touch Screens Redefine the Market".