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Dead Phones Get New Life on the Refurb Market

Mon, 08/23/2010 - 7:17am
Maisie Ramsay

By the time Joe Gusman realized the new phone he bought from Sprint didn’t have the capabilities he needed, the 30-day grace period on the device had expired. Instead of going to his carrier and spending hundreds of dollars on an unsubsidized device, Gusman decided to go the refurbished route and purchased a second-hand BlackBerry device from CellularTrendz, which sells used and refurbished phones online.

“It was at an unbelievably reasonable price and came with a 30-day guarantee,” Gusman says, adding that the only negative part of his experience came when he tried to figure out how to use the device. “Because I bought a refurbished phone, I had to go online and find instructions on how to operate it. You’re on your own finding out how to use it.”

Troy McClymonds, founder and CEO of CellularTrendz, says the phones his company refurbishes are typically $100 to $200 cheaper than a new phone purchased from a carrier. Devices listed on CellularTrendz website range from an unlocked $347.90 BlackBerry Bold 9700 for AT&T or T-Mobile USA to a $29.95 BlackBerry 7780, a model which dates back to 2004.

“Overall, our customers are looking for a good deal outside of their carrier,” McClymonds says.

Deals are precisely what refurbished phones offer. AT&T is selling first-generation iPhones as cheap as $49.99 with a new activation and two-year contract. T-Mobile has a refurbished HTC HD2 listed for $49.99. Subscribers can get a variety of phones from third-party websites like recellular.com, amazon.com and, of course, eBay.

Along with the deals come some risks, however. Refurbished phones aren’t typically in mint condition, and the warranty on them varies by the company that did the repairs. CellularTrendz, for instance, offers a 30-day warranty on its devices but does not offer the type of insurance AT&T provides, which covers items like water damage.

Older phones may not be E911 compatible, making it difficult for emergency personnel to pinpoint the exact location of a call placed from a cell phone. Transactions on eBay also can be iffy, as there are few guarantees as to the origin and condition of the phone. People who buy a phone off eBay and find it doesn’t work may run into difficulty returning it.

As a result of these complications, it’s best to stick to reputable dealers when buying a second-hand device. McClymonds says CellularTrendz often gets calls from customers asking if his company is real. “I get that call all the time,” he says.

U.S. consumers tend to be unfamiliar with the process of repairing a phone or buying a refurbished model outside of carrier channels because it’s not a common practice in the United States. Most subscribers simply replace a broken phone with a new device, relinquishing the broken model to their carrier or stowing it in a drawer. It’s fairly atypical for a subscriber to have a device repaired, with the notable exception of the iPhone.

“We are definitely in a throwaway society,” says Mike Morgan, senior mobile device analyst at ABI Research. “Considering the price point of most phones, you’re probably not getting back what you put in when you repair a phone, and it’s not a carrier’s business to fix the phone.”

Americans' appetite for new phones has helped create a healthy refurbished phone business in some emerging markets, mainly Africa, though it’s not always a legitimate business, Morgan says. Murkiness around the exact numbers of devices in circulation in both Africa and the United States makes it difficult to establish estimates on the number of refurbished phones traveling between the two countries.

Second-hand phones may be less mainstream in the United States than in some other countries, but that’s not to say there isn’t a market for them domestically. Refurbished phones have become an established part of the mobile landscape as carriers take in broken devices and repair some of them for resale to subscribers.

AT&T, Verizon Wireless and T-Mobile USA all offer refurbished devices of some sort, and Sprint is experimenting with a program of its own. Sprint hasn’t traditionally sold refurbished devices, but after finding that it had a surplus of Palm Centro devices, the carrier decided to launch a pilot program for previously owned Centro phones.

“It’s better for the environment and ultimately is better for customers,” says Sarabeth Patch, Sprint’s environmental sustainability communications manager, of the carrier’s new program. “So far, we see it as a good thing on multiple fronts.”

Sprint works with OEMs and OEM-certified facilities to bring phones up to snuff for resale. Together with its refurbishing partners, Sprint performs RF testing, cosmetic inspection and replacement, mechanical inspection and electrical component testing and a data-clearing process that wipes phones clean of subscribers’ personal information. Phones are also updated to the most current software.

Sprint’s Centro pilot program is part of its larger initiative to collect nine out of every ten devices it sells for reuse or recycle by 2017. Last year, Sprint’s reuse/recycle rate was around 40 percent, almost double the rate in 2007.

Refurbs Go Green, Help Nonprofits

Refurbished and recycled cell phones have strong environmental and social components. Recycling cell phones has become particularly important to combat the growing problem of electronic waste, with the Environmental Protection Agency (EPA) estimating that just 10 percent of cell phones in the United States were recycled in 2007.

“Our process keeps the product out of landfills, reutilizes devices and their original materials and conserves resources,” says Eric Forster, senior vice president at cell phone recycling giant ReCellular, which has been in the business for nearly 20 years. “It also brings an opportunity, whether domestic or international, to bring wireless service to a population that wouldn’t be able to afford traditional programs otherwise.”

ReCellular processes an average of 20,000 phones every work day. In 2008 alone, the company collected 5.5 million handsets. ReCellular has won numerous environmental awards for its recycling work and internal conservation efforts, including recognition from the Michigan Recycling Coalition and two awards from the EPA for the green power purchase that ReCellular commits to on an annual basis.

“Our company has taken a very hard stance on what it takes to be living green,” Forster says. “We recycle everything but the leftover lunches in the lunchroom.”

Forster says increased environmental awareness and the growth of the cell phone market have been good for the company’s top line. “We are growing significantly, particularly in refurbished products for prepaid applications,” Forster says. Refurbished phones are especially popular in the prepaid space, where budget-strapped consumers can take advantage of the lower price point.

Refurbished phones also have become important to nonprofit groups that use the devices to connect people in need, such as domestic violence victims.

Verizon’s HopeLine program collects phones, batteries and accessories from any provider, refurbishes them and donates the finished product to groups that provide services to victims of domestic violence. Since its inception in 2001, the HopeLine program has distributed more than 90,000 phones.

Cell Phones for Soldiers uses funds from recycled cell phones to buy prepaid phone cards for active duty members of the military. The program uses all of AT&T’s 2,000-plus company-owned retail stores as drop-off sites for the devices, and has drop boxes in other businesses, including Liberty Tax Service. Cell Phones for Soldiers has distributed more than 75,000 phone cards to soldiers overseas since its launch in 2004.

These two programs have helped inspire similar charitable efforts, with cell phones being refurbished and recycled to support initiatives ranging from helping senior citizens stay connected in emergencies to curing breast cancer.

When cell phones break down, it’s not the end of their existence. They could be fixed, broken down for parts and the valuable metals they contain can be sent to foreign countries or help non-profits bring wireless connectivity to people in need. The worst-case scenario is a phone ends up in a landfill when it could have been reborn in a multitude of different ways.

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