Cellphones Are Eating the Family Budget

More than half of all U.S. cellphone owners carry a device like the iPhone, a shift that has unsettled household budgets across the country. Government data show people have spent more on phone bills over the past four years, even as they have dialed back on dining out, clothes and entertainment -- cutbacks that have been keenly felt in the restaurant, apparel and film industries.

The tug of war is only going to get more intense. Wireless carriers are betting they can pull bills even higher by offering faster speeds on expensive new networks and new usage-based data plans. The effort will test the limits of consumer spending as the draw of new technology competes with cellphone owners' more rudimentary needs and desires. So far, telecom is winning. Labor Department data show spending on phone services rose more than 4% last year, the fastest rate since 2005. During and after the recession, consumers cut back broadly on their spending. But as more people paid up for $200 smartphones and bills that run around $100 a month, the average household's annual spending on telephone services rose to $1,226 in 2011 from $1,110 in 2007, when Apple's iPhone first appeared.