I don't think the Pentax 17 was ever aimed at the public at large. I think it was marketed to the new analog photography market - people who already use or are interested in film photography and would like to buy a new camera instead of relying on the used supply. It will never replace the mobile phone for most people, as indeed dedicated digital cameras won't either (which is why the compact digicam market is now a tiny fraction of what it once was). The camera phone is convenient, easy to use, is usually with them when you need it, and the quality is more than enough for their needs.
I expect there are many reasons why people choose to use film, but outside of professionals who still use the medium, most of them will probably come down to some variation of "because I want to", rather than any considerations of costs, or technical quality (although I personally believe that film does look better than phone images, which start to fall apart if you look at them on a display much bigger than, well, a phone screen) . The cost of film will put some people off, but mostly it will be a case of what people can afford or, more pertinently, what they are prepared to spend to do the thing that is important to them.