A Lebanese woman takes pictures with her cell phone
A Lebanese woman takes pictures with her cell phone - 
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Bill Radke: The best-selling consumer smart phone in America no longer belongs to Apple Last quarter, the iPhone was outsold by the BlackBerry Curve. And that might not last, either -- Palm will soon come out with its much-awaited phone. If all these cell phone choices make you feel overwhelmed, this next story might have you grateful again. Reporter Ben Gilbert takes us now to Beirut, where cell phone innovation is coming very slowly.

Ben Gilbert: Lebanon's two cell-phone companies are owned by the state. They're the second-biggest money-makers for the government, bringing in $1 billion year. But it comes at a cost to everyday Lebanese, who pay an average 40 cents a minute, and that's just for local calls. Not surprisingly, only 30 percent of people here own a line, a very low number in the phone-crazy Middle East.

Kamal Shehadi is in charge of regulating Lebanon's cell-phone industry. He says it's a backward system -- one used by only three other countries in the world.

Kamal Shehadi: North Korea, Libya and Cuba are hardly models of good telecommunications.

To push Lebanon's cell-phone system into the 21st century, Shehadi's agency has lobbied to get the government to auction the networks to a private company. But that's been put on hold because of the financial crisis. So the agency has organized much smaller auctions online, and at a posh hotel in Beirut for "premiere" cell-phone numbers.

[Sound of Lebanese national anthem]

The Lebanese national anthem signaled the start of bidding. On the block were 33 unique cell-phone numbers, like 70707070.

Auctioneer: Last call at $450,000. Once, twice, last call -- sold!

Yes, you heard correctly. That's $450,000 for a phone number. The auction attracted deep-pocketed bidders from Lebanon and the oil-rich Arabian Gulf countries, all of whom were highly aware that social status here is reflected your clothes, car and cell phone number. But the auction did raise $2.5 million to improve Lebanon's mobile network.

Ministry of Telecommunications official Gilbert Najjar says it's for a good cause:

Gilbert Najjar: If you're willing to put money into it, we're willing to have the whole community share in your vanity.

Najjar hopes this auction is just a prelude to a later auction which will privatize the networks. He says privatizing the companies will provide better reception, expand services, and lower prices for Lebanon's hard-hit consumers.

In Beirut, I'm Ben Gilbert for Marketplace.