2 Cell Phone Sector
2.1 Product life-cycle and technologies
The cell phone life-cycle includes design, manufacture, distribution, use and disposal (or, alternatively, refurbishment or recycling components.). There are a number of international studies evaluating the life-cycle environmental costs and benefits for cell phones. Vodafone, for example, recently commissioned a report by Forum for the Future [Goodman J. 2004.Return to Vendor: How second hand mobile phones improve access to telephone services, report prepared by Forum for the Future for Vodafone, November 2004.] which investigated a "whole of life" approach to environmentally and socially responsible management of cell phones. The report concludes that the responsibility for responsible reuse of phones, or recycling of handsets should be ascribed to everyone involved:
- operators and retailers run handset return schemes that lead to reconditioning or recycling of handsets;
- handset manufacturers can contribute by designing handsets that are easier to disassemble and recondition.
From our discussions to date, this "whole of life" approach to cell phones is similarly supported by Telecom.
As discussed in Section 1.1, this particular case study is focused on the disposal phase of the cell phone - what benefits can be realised by diverting cell phones from the spare drawer or the landfill, and what government support is needed in this endeavour. In this regard, it is more a cell phone waste management study, as opposed to an evaluation of potential product stewardship initiatives applied to other components of the cell phone life-cycle such as manufacture and distribution.
Technologies for cell phones are evolving rapidly and this has some implications for product stewardship. As cell phones become mobile "life managers", with built-in access to the internet, email functions, video-calling and other features, there are some security concerns arising from re-sale of phones. Significant amounts of personal information may be contained within the phone memory and passed on to a second user. The rapidly evolving technology does, however, allow for greater use of second hand phones. It creates a market where some customers will continue to purchase the latest technology and others will purchase a second hand product with older, less sophisticated technology features but at significantly less cost. The rapidly evolving technology therefore reduces manufacturer concerns regarding "cannibalising the market", which is discussed further in Section 5.3.
2.2 Responsibility for phone take-back
All of the existing and proposed New Zealand initiatives with respect to responsible phone reuse and recycling have been, and continue to be, put forward by New Zealand's two main service providers - Telecom and Vodafone. Our study has therefore focused on these schemes, and the extent to which they can be supported by government. It is interesting, however, to evaluate the "drivers" for this responsible approach to end-of-life cell phone management and why, thus far, it has been carried out by the service providers as opposed to the manufacturers.
In New Zealand, as is discussed in detail in this report, there are sound customer service reasons for the service providers to initiate cell phone take-back schemes. Additionally, the service providers are directly involved in the retail market and there is therefore a strong, direct relationship with the consumer that is returning the phone - in a sense many consumers regard their phone units as "Vodafone" or "Telecom", as opposed to the manufacturer. This situation differs from the situation overseas, for example in Europe where, as a result of the European Union (EU) Waste Electronic and Electrical Equipment (WEEE) initiative, there is a mandatory requirement for manufacturers to take-back their phones. In New Zealand, with the responsibility for this function being taken on by the service providers, the manufacturers are in essence "free-riders" in the scheme and are not being asked to shoulder any costs for responsible end uses for their project.
We believe that, for the purposes of this study, the most effective approach is to proceed on the basis that the service providers are well placed to act as "custodians" for responsible phone end uses. The very presence of the existing and proposed schemes support the business case for this situation. Adoption of responsibility by the service providers is particularly valid for the New Zealand situation where the market is small and therefore, from the manufacturers perspective, would not warrant the investment in infrastructure required to collect individual brands of phones. It is also much simpler for consumers and retailers to be returning phones to one or two "points", as opposed to different manufacturers.
Having established this starting point, however, it should also be borne in mind that the role of the service providers in the responsible management of used phones may not be inherently stable. The stability of the schemes is directly linked to the continued motivation of both Vodafone and Telecom - which will be determined by the ongoing cost/benefit analysis from each of their individual company's perspective.
To mitigate this risk we are recommending that the potential role of the manufacturing organisation in these schemes is evaluated in the New Zealand context in further detail. There are some inherent barriers from the manufacturers' perspective to full support of phone take-back schemes. These are discussed further in Section 5.3 and relate to "cannibalising" the markets. The manufacturers may, in some cases, be reluctant to support increased proportions of "second hand" cell phones in a market where they sell new phones. Despite these constraints, there are a number of current international joint initiatives evaluating options for more cell phone product stewardship. In Europe, for example, Vodafone are involved in a joint initiative with Nokia and a raft of other network service providers and manufacturing companies (including Epson, France Telecom, Intel, Motorola and Panasonic) evaluating the potential for DfE for cell phones. [Nokia, September 2005.Integrated Policy Pilot Project. Stage III Draft report. Analysis of Improvement Options.] DfE options are numerous and include:
- reducing the use of halogen containing polymers in the plastics used for product packaging;
- eliminating the use of chlorinated and brominated flame retardants in moulds;
- eliminating the use of heavy metals and softeners (for example, phthalates) in plastics;
- reducing the standby power consumption of phone chargers;
- increasing the amount of recycled materials in product components;
- analysing optimum cell phone life span;
- implementing a system for selecting suppliers whose components have the lowest life-cycle environmental impacts.
In addition to this initiative there are a number of related manufacturing/service provider projects being completed overseas - many of which Vodafone is an active participant in. These include the Mobile Phone Partnership Initiative and the Mobile Phone Working Group.
These projects are critically important but not fundamental to charting the way forward for New Zealand in terms of government role and proposed private sector schemes. We have assumed for this study that the manufacturing driven design improvements will be built into the phones coming into New Zealand. The recommendation is therefore to further evaluate potential joint initiatives, in the New Zealand context, with the manufacturers and to track the work occurring overseas in this area.
Also, in terms of success and stability of New Zealand phone take-back schemes, there may be more to be learnt from overseas examples, in particular concerning the EU directive. There must be an extensive analysis completed to support the step of introducing mandatory take-back schemes across the entire e-waste sector, including cell phones. The need for mandatory requirements may be linked back to the reluctance of manufacturers. As a result we are also recommending that the "drivers" and "risks" associated with greater manufacturer responsibility, in the New Zealand context, is further evaluated with reference back to the differences between the situation here, and overseas.
2.3 The New Zealand cell phone sector
The following provides an overview of the components of the cell phone product life-cycle in New Zealand relevant to this case study.
Service providers
Telecom New Zealand and Vodafone are the two main service providers for mobile phone networks in New Zealand. Each company has approximately 50% of the market share. Approximately 20% of Vodafone customers are "on account" - which means they are likely to be workplace phones versus the 80% pre-paid individual customers ("prepay"). In comparison, approximately 40% of Telecom's customers are "on account" and 60% are on prepay. Both organisations are keen to increase their market shares in both customer sectors, but in particular the "on account" customers as these require lower transaction and customer support resources.
Cell phone penetration into the New Zealand market is 93%. Neither Telecom nor Vodafone [Personal comments received during sector group meeting - Wednesday 29 March.] are concerned about additional service providers taking up significant market share in the near future. Telstra Clear have some customers in New Zealand and Econet have been discussing plans to enter the market, primarily at the lower end, for some time.
Phones imported by service providers
Vodafone offers a large range of Motorola and Nokia phones and a smaller range of HP, Panasonic, Sharp, Palm Treo and Sony Ericsson. Telecom, on the other hand, specialises in Sanyo and Nokia branded phones, with a smaller range from Samsung, LG, Palm Treo, HTC and Pantech.
Parallel importers
Parallel Imported Ltd has been operating for four years and now has three mega stores around New Zealand. Companies such as this are able to offer a wide range of "021" (Vodafone) phones. As they buy and sell direct and sell only handsets, their prices are very competitive. There is little information available about the market share that parallel importers have control over, despite repeated attempts to contact Parallel Importers Group. The Ministry for the Environment may wish to obtain further information from parallel importers to find out how they operate and the impact they have on the market.
Retailers
Vodafone and Telecom have stores situated throughout the country. Vodafone own and operate approximately 20 stores and the remainder are franchised. Both Vodafone and Telecom also sell products and services from a range of dealers and electrical stores. Vodafone retailers include 100% Your Electric Store, Bond and Bond, Noel Leeming, First Mobile, Digital Mobile, Mobilefone Solutions, DS Wireless, Vodafone Rentals, Hill & Stewart, Harvey Norman, Smith City/Powerstore, Dick Smith Electronics, Retravision and Farmers. Telecom products are available from a similar range of stores, with the addition of The Warehouse.
Figure 2-1 illustrates the waste disposal stages for the cell phone life-cycle in New Zealand and the key stakeholders involved. Please note that the figure has been provided by Vodafone but with relatively minor modifications could also be applied to Telecom.
