The $1,000 iPhone And The Digital Divide

Apple’s announcement of the iPhone X brought ecstatic excitement from Apple fanatics and stunned disbelief from the rest of us. A thousand dollars for a phone? Can the new iPhone possibly be worth what Apple plans to charge?

Most of the buzz about the new phone stems from the facial ID, longer lasting battery and a new 12-megapixel camera. Is there anything worth the increased cost over older iPhones or newer Android models?

To people who are not Apple fanatics, the answer would seem to be no. For example, the LG G6, introduced seven months ago, has a 13-megapixel camera. Android phones even have expandable memory. With iPhones, you are stuck with what you buy originally. Facial recognition? In an age of NSA lurking and surveillance algorithms, many people don’t want their face on their phone any more than absolutely necessary.

Apple is increasingly positioning itself as the electronics provider to the elites. The company’s products are well-engineered, but in the post-Steve Jobs era, are hardly revolutionary. As prices increase and yield diminishing returns, the company’s market share is decreasing. Apple recently dropped to third-place in the global mobile phone market share, ranking behind both Samsung and the Chinese company Huawei.

Apple’s decline and Huawei’s rise is purely related to the laws of supply and demand. As the price of Apple’s phones increases, the demand will slow. At the same time, the demand for cheaper phones increases.

The average income for an American head-of-household is about $36,000 annually or $3,000 per month. How many Americans will be able to afford a phone that costs a third of their monthly income when cheaper Android phones can visit Facebook and play cat videos just as well, if not better?

In the rest of the world, the numbers are even more stark. The global average income is only about $20,000. An iPhone X would represent weeks or months of labor for people in most parts of the world. This is why Huawei is doing so well with its cheap phones.

For most people, the expenditures don’t stop with the purchase of the phone either. A phone is no good without a cellular service provider and probably Wifi for you home as well. If want to watch TV or movies, you’ll need subscriptions to Netflix or Hulu. For music, you’ll be paying Pandora or Rhapsody or something similar. There are eBooks and dating apps and a thousand other subscription services to spend your monthly paycheck on. And don’t forget to insure that expensive phone! Otherwise you’ll be like countless other iPhone owners walking around with cracked screens that they can’t afford to repair.

Phone owners may be going broke, but Apple isn’t. In August, the company reported seven percent growth and revenues of more than $45 billion. Yet the company is in danger of becoming a niche player.

No matter how good Android phones are, Apple is still the gold standard of mobile phones. The Apple logo on your phone is a status symbol. But like most status symbols, it is a luxury that much of the world cannot afford.

Apple may be on its way to becoming a luxury electronics product that is a little more than a way to show off for the wealthy and trendy electronics users. The rich will always be able to afford iPhones, maybe even a gold-plated one. Likewise, college students who follow electronics fads and don’t mind camping out overnight at the Apple store to add an extra thousand dollars to their mountain of college debt won’t be fazed by the Apple price tag.

For the rest of us, Android is increasingly the mobile phone of choice. Whether high-end Samsung and LG models or supercheap Huaweis, Android phones are increasingly capable and, in many ways, better and more practical than the elite Apple products.

The digital divide, like income inequality itself, will always be with us. But there are things that can unite Apple and Android users… like making fun of those who still carry a Blackberry.

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