The surge in the popularity of inexpensive but cutting-edge smartphones is more than just another marketplace success story. It is one with profound social implications, particularly among low-income Black and Hispanic consumers who have long been on the losing end of the digital divide.
If there has been any recent development that has helped to bridge that divide in communities like my own here in Harlem, it has been the advent of low-priced smartphones.
Indeed, studies have shown that Black and Hispanics access the Internet on a cellphone, tablets or other mobile handheld devices at demonstrably higher rates than whites.
However, the days of inexpensive smart phones may be coming to an abrupt end, due in large part to an ongoing patent dispute playing out in a federal district court in California.
Apple, the maker of high-end devices like the iPhone, is suing Samsung, the maker of more inexpensive devices, claiming that Samsung has copied its technology.
If there is anything I learned during my two decades on Wall Street, it is that some corporate disputes should be worked out in the boardroom rather than the courtroom. This is one of them.
Apple must stop waging this legal war on its main competitor, Samsung, because it is anti-competitive and could ultimately decimate the smartphone market that is enabling the digitally disenfranchised go online.
The case is part of a larger battle between the two companies. And as part of its demands, Apple is asking that Samsung pay it a $40 royalty for every Samsung phone or tablet that is sold.
Apple has not stopped there, though.
It has also asked the courts to ban the sale of certain Samsung mobile devices, all of which offer Google’s Android mobile operating systems that rival Apple’s software.
A U.S. District Court judge in San Jose has rejected Apple’s request. But the company is appealing the judge’s decision.
Some experts note that the legal remedies sought by Apple, which caters to a relatively affluent clientele, could translate into higher costs being passed on to consumers who have come to depend on the inexpensive products offered by competitors, which cost roughly $370 less on average.
If an April 2012 Pew Research study is any measure, the social stakes are high. “Groups that have traditionally been on the other side of the digital divide in basic Internet access are using wireless connections to go online,” the study noted. “Among smartphone owners, young adults, minorities, those with no college experience, and those with lower household income levels are more likely than other groups to say that their phone is their main source of Internet access.’’
Of course, the potentially damaging effects of the court case could be avoided if the parties found a way to settle their differences outside the courtroom. Apple, for example, could try to hammer out cross-licensing agreements with Samsung instead letting the courts intrude on marketplace dynamics.
After all, it is because the marketplace has been relatively free and open that we have seen the kind of innovation that has provided Internet access to individuals who might not have otherwise been able to go online.
For all its standing as a model of American ingenuity and success, Apple serves a relatively narrow segment of the market with a limited number of smartphones – 3 – that fetch premium prices.
By contrast, its main competitor, Samsung, offers more than two dozen models of smartphones that cater to everyone from affluent consumers to those of modest means.
In the end, the legal standoff could go on for months – or even years. But my hope is that the consumers – particularly those on the lowest rung of the socioeconomic ladder – are not forgotten in the heat of this battle.