SAN JOSE, Calif. — Apple's iPhone 3G became the top selling handset among adult consumers in the U.S. in the third quarter of 2008 amid a significant fall off in unit sales and revenue in the sector, according to market watcher The NPD Group (Port Washington, N.Y.).

Apple's rapid rise as a cellphone player comes as an anticipated economic recession is dampening overall sales. In addition, the company is embroiled in a legal suit with IBM after hiring a Big Blue executive to lead its iPhone and iPod division.

U.S. handset purchases by adult consumers in the third quarter declined 15 percent to 32 million units compared to the same period in 2007. Consumer handset revenues fell 10 percent to $2.9 billion although average selling prices rose six percent to $88, NPD reported.

In its latest quarterly report, Apple said it has sold more than 10 million iPhones in 2008 as of mid-October. Apple and RIM have both been gaining market share at the expense of worldwide leader Nokia. However, one analyst recently projected Apple's sales could fall by more than 40 percent in the final quarter of the year due to the deteriorating economic climate.

The iPhone 3G surpassed the Motorola Razr which had been the leading handset for 12 quarters among U.S. adult consumers, NPD said. The Razr now ranks in second place followed by Research in Motion's Blackberry and two phones from LG Electronics.

"The displacement of the Razr by the iPhone 3G represents a watershed shift in handset design from fashion to fashionable functionality," said Ross Rubin, director of industry analysis for NPD in a prepared statement. "Four of the five best-selling handsets in the third quarter were optimized for messaging and other advanced Internet features."

Rubin cited "a growing data divide in cellular handsets. Those who see the value in wireless Internet access are justifying the investment, whereas voice-centric users have little incentive to upgrade," he said.

Thirty-six percent of handset buyers said they wanted cellphones that could send and receive text messages. Thirty percent of handsets sold in the quarter sported a qwerty keyboard, up from 11 percent in the same period in 2007. The percentage of phones enabled for Bluetooth (83 percent) and music downloads (68 percent), continues to rise, the company said.

The NPD data was based on more than 150,000 online surveys of consumers 18 years and older.