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AT&T recently offered refurbished iPhones for $99 (8-gigabyte model) as a promotion. With the slowing economy, other similar promotions may be in the offing.
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msnbc.com
updated 1/5/2009 8:51:56 AM ET 2009-01-05T13:51:56

When AT&T recently offered refurbished 8-gigabyte iPhone 3Gs for $99, news of the deal eclipsed another major iPhone announcement, that Wal-Mart is now stocking the hottest smartphone in America.

If you can get a refurbished iPhone for $99, are good deals in the offing for other popular smartphones, like the BlackBerry Storm and the Google G1?

They may be if enough consumers, faced with buyer’s remorse, a change of heart, frustration or problems with such devices, decide to return their multi-functional gizmos within 30 days, making those phones eligible to be refurbished and re-sold by wireless carriers.

“As more and more phones become smartphones, more capable and more feature-rich, we’re likely to see the number of refurbished phones going up because of returns,” said Kevin Burden, ABI Research’s mobile devices research director. “Some phones may not meet the expectations of buyers, who see them as too complex.”

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Smartphones, so-named because of their ability to handle e-mail, Web browsing and some computer-like functions, are one of the hottest segments in the cell phone market, propelled in part by devices such as the iPhone and Research In Motion’s line of BlackBerrys.

But the complicated bits of communications gadgetry are not for everyone, said Burden. “We’ve talked to plenty in the industry who say, ‘We sell (some) people a snappy smartphone, and they come back a couple weeks later and say they don’t get it, it’s too confusing. They want a phone where they can make a phone call, do text messaging and maybe have something to hold their calendars.’ ”

Touchscreen phones, in general, are still new to many users, who may think they want such phones, but find themselves longing for physical buttons to press, be it a phone keypad or QWERTY keyboard, once they get the phones home.

“What I have seen with touchscreens is that they tend to polarize people,” Burden said. “Some people absolutely love them; others absolutely hate them. But if a phone is returned, it doesn’t necessarily mean it’s not working right or working the way it’s supposed to; it’s just not meeting the expectations of those particular users.”

Appeal in a down economy
The $99 iPhone, available only online, was a “promotion” for the last two weeks of December, along with $199 pricing for the 16GB iPhone, according to AT&T spokesman Mark Siegel. Both phones were priced at $100 less than the retail cost with a two-year data and voice contract.

As of Jan. 1, refurbished iPhone prices were back up, with 8GB iPhones shown on AT&T’s site for $149, and the 16GB model at $249.

Given the current economy, refurbished phones — especially high-demand models such as the iPhone — may have more appeal to cash-strapped buyers.

“I think what you sometimes see in tough times is a flight to quality,” said Siegel. “And the iPhone’s a great example of that. If we can put refurbished iPhones into the hands of folks for just $99 and they get the benefits of this great device, all the better.”

Siegel declined to say whether AT&T will offer another round of discounted refurbished iPhones, which come with a warranty of “90 days or more,” according to the company. New phones usually come with a one-year warranty.

AT&T, which sells other refurbished phones, including models of the BlackBerry Curve and Pearl, as well as Palm Centro, notes on its site that “refurbished phones are previously owned devices that have been unused or lightly used and returned during the 30-day trial period.”

Each phone, the company says, is “independently quality tested and loaded with the latest software to meet current factory standards.”

Part of the iPhone’s appeal is its sleek design, encased in black or white plastic, with a large 3.5-inch touchscreen. AT&T notes that “some refurbished iPhone 3G devices will have minor scratches,” which could be a deal-killer for those who want to start their relationship with the phone scratch-free.

Always check the warranty
Refurbished phones are also available via the Web through independent retailers. Carriers sometimes also sell them to customers who opt for pre-paid, or pay-as-you-go, phone services.

The major wireless carriers vary when it comes to selling refurbished phones to customers for contract plans. Sprint and Verizon Wireless do not, as of now. T-Mobile sells some refurbished phones (no G1s, or Android phones, yet), and AT&T has the broadest selection available.

The disincentive for carriers is the price; refurbished phones can sell for up to 60 percent less than retail price.

Checking what kind of warranty is offered on a refurbished phone is important. Ninety days is considered good and should be enough time for you to learn if there are any problems with the phone; anything less may not be so reassuring.

T-Mobile says its refurbished phones are under warranty “from either 90 days of receipt or the remainder of your 12-month service agreement, whichever is longer.”

'Double-edged sword'
“Buying a refurbished smartphone is a double-edged sword,” said Adam M. Fendelman, who reports on cell phones for About.com’s cell phones guide.

“On one hand, they tend to be more expensive than cell phones and the definition of refurbished is that you're buying for less. On the other, you get what you pay for and you're opening a can of worms for potentially more problems than buying new.”

Fendelman recommends buyers compare the cost savings they might get by going with a refurbished smartphone to the cost of a new one “to gauge whether that's worth potential hassles down the road. If your refurbished price is 10 percent off, that may not be worth it for you. If you're being offered 30 percent off, though, that may be the golden number.”

He also advises buyers to ask wireless carriers and vendors if they will guarantee that the refurbished smartphone they’re buying “isn’t dead on arrival.” Buyers should also ask why the phone was returned in the first place and if it was restored to factory specifications.

Still a small percentage of market
New phones that are returned to wireless carriers and wind up being sold as refurbished are supposed to be “reflashed,” meaning all the data previously on the device is wiped clean, and the phone’s software is restored to factory settings.

For now, refurbished phones remain a relatively small percentage of the worldwide cell phone market, said Burden of ABI Research.

In 2008, with about 1.2 billion handsets shipped worldwide, 40.7 million of those were refurbished phones. It’s a number he expects will increase this year to perhaps 46 million.

ReCellular Inc., which sells both refurbished and recycled phones to businesses worldwide, says that the “average American replaces their cell phone every 18 months.”

Three years ago, ultra-compact phones, like Motorola’s early generation of RAZRs, and “entry-level” camera phones were among the popular consumer choices. “Today, those phones are being retired in large quantities as consumers are moving toward newer technologies, especially smartphones and multimedia-enabled handsets,” said Chuck Newman, company CEO, in a statement.

Based on that trend, the company said it “expects the best-selling models of today — such as the Apple iPhone and BlackBerry Curve — to appear on the list of top recycled models in 2009 or 2010.”

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