Issues and Barriers
6.1 Encouraging customers to return phones
There are significant challenges and costs associated with educating and motivating customer to bring phones back. To date, in New Zealand, the two main service providers, Vodafone and Telecom, have adopted several initiatives to educate consumers. The ongoing viability for these initiatives hinges on the business case for their cell phone take-back schemes. Other alternatives for encouraging consumers include use of phone take-back as a fundraising initiative and also internet-based schemes.
Private sector phone take-back schemes
To date, there has been relatively limited success with cell phone handset recovery by both Vodafone and Telecom. Current schemes, at time of writing, are not running effectively. They have poor participation and the disposal of phones has been delayed by the loss of recycling facilities in Singapore.
The major obstacle identified by both Telecom and Vodafone is educating the consumers to return end-of-life handsets to them for refurbishment or recycling. It would seem that the majority of consumers perceive cell phone handsets to have continued value, even after they have finished using them, and prefer to hold onto them, rather than return them. This approach is partly because of the financial outlay associated with the cell phone and the logic that an old "back-up" phone may be useful if the replacement malfunctions. This leads to the issue of whether to incentivise any handset return programmes that are launched, to offset the perceived value of the handset to the consumer. Historically, this has been done by both Vodafone and Telecom by offering free air time per handset returned. This may be, for example, a $5 credit for each component returned, however, Vodafone have already found issues with unscrupulous owners returning their handsets in a broken down form, such as mobile charger, battery and handset separated, and claiming the $5 air time for each component.
Significant investment is required to educate and raise awareness amongst customers. Also there are additional costs (e.g. such as trade-in schemes and free air time) to incentivise customers to bring phones back.
Given the costs and resources required to sustain a successful phone take-back scheme, the scheme operators (in New Zealand's case, Telecom and Vodafone) must be able to establish a significant business "upside". Without this, the schemes could become nonviable commercially and potentially unsustainable.
It is more difficult to quantify the costs of a phone take-back scheme than the benefits. The benefits (put forward by both Vodafone and Telecom throughout this study) arise from the following:
- specifically implementing the organisations' commitments to acting in an environmentally and socially responsible manner;
- providing for more "touch points" with the customer and supporting the notion of an organisation with a "duty of care" to look after their customer and product;
- diverting cell phone from landfills;
- greater resource-use efficiency - either through reusing the whole phone or recycling its components;
- social benefits from being able to supply phones to individuals that may otherwise have been unable to afford one.
School and charity fundraising initiatives
There are a growing number of overseas examples of schools and charities working with either phone manufacturers or service providers to use phone take-back schemes as a means of raising money. These schemes are mostly being developed jointly by the schools/charities and the private sector. Essentially, the school or charity promotes the concept within their community. Individuals are encouraged to bring back used phones, previously stored, to a central collection point at the school. The central collection bin is supplied by the private sector partner, say Nokia, and once it is full it is exchanged for a cash refund.
These types of community/private sector fund raising initiatives provide an excellent way of obtaining used phones and also educating consumers that a phone is more valuable recycled than if stored or discarded. They also focus on young people, who are one of the main users of cell phones.
Internet-based recycling schemes
On the basis of research carried out during this study, there are a growing number of internet-based phone take-back schemes which could potentially be developed in New Zealand to promote phone take-back. The relationship between these initiatives and the currently proposed Vodafone and Telecom initiatives would need to be clearly established.
The internet-based schemes, such as RIPMobile (refer Section 5.0), are targeted at youth, potentially a large "source" of discarded phones.
6.2 The overall WEEE volume
As discussed earlier, the sector representatives involved in this report believe that cell phones do not in themselves constitute a significant waste management issue in New Zealand. The issue is part of a much broader one relating to all electrical and electronic goods.
The Ministry for the Environment considers e-waste a growing environment problem, and notes the following problem wastes in particular:
- information technology - laptops, PCs, printers;
- communications - mobile phones, phones, fax machines;
- whiteware - refrigerators, cookers, washing machines;
- lighting - fluorescent lamps;
- general consumer entertainment equipment - televisions, stereos, DVD players.
Collectively, this constitutes a large and growing component of our waste stream and also a number of hazardous materials. Overseas, the responsibility for the e-waste is being shifted towards the producers. For example, the EU WEEE Directive requires that all 25 EU member states have a system in place for take-back of these items. The financial costs of transporting and treating the collected waste is ascribed to the producers, who were also deemed responsible for taking back all products sold.
The trends in managing e-waste internationally are relevant to this case study, in the sense that they support the concept of any broader government initiative related to cell phone product stewardship to be applied to all e-products, and not restricted to cell phones.
6.3 Markets for refurbished phones
There are a number of separate issues arising from selling refurbished phones.
Cannibalising the market
Although companies such as Nokia and Sanyo have instigated new environmental policies, including product stewardship schemes within the Japanese marketplace, they are not keen to support any reuse schemes. This is based on the fact that any reuse schemes introduced will impact on the new mobile phone market and, as manufacturers, volume is the driving force behind their business. Also reuse schemes, as applied to the manufacturers, are restricted depending on whether the collected phones are CDMA (Telecom) or GSM (Vodafone).
Cannibalising the market should not be an issue for the New Zealand service providers, Telecom and Vodafone, except so far as it could influence their relationships with their suppliers. Findings from Vodafone's Forum for the Future study showed that second hand cell phone users are only slightly less lucrative customers for the network provider, spending almost the same on mobile services per month and using handsets to a similar degree. Interestingly, these customers are likely to go on to buy new phones in the future and to continue to use mobile services. It therefore makes commercial sense for operators to build customer loyalty and satisfaction from an early stage by supporting the use of second hand cell phones.
Despite this situation, both Vodafone and Telecom have existing relationship with phone manufacturers. As a result the service providers may have some concerns (not discussed during this study) about the adverse impact on their relationship with manufacturers if they were successfully promoting reuse of cell phones.
Security of data - reused phones
There are also some issues related to the security of data in reused phones, and whether the new owner could potentially have access to information related to the previous owner. This issue has received some media attention and is becoming of greater concern as phones become more widely used for a broader range of functions, for example, emails and internet browsing. A recent survey [Pew Research Centre - Internet and American Life Project. March 2006.] in the United States found that although only 2% of cell phone users currently use their phones for these applications, up to 20% would like to and the numbers are predicted to grow. In particular, the younger generation are predicted to increasingly be using phones for a wide variety of functions that will require memory, and hence create a potential security issue for reused phones.
Size of market
Telecom has also identified a small potential market for mobile phone reuse within New Zealand, reducing the impact associated with having to ship handsets overseas. They envisage that this will be a very small proportion of returned handsets, due to age, compatibility with new networks and damage; however, this will still deliver benefits to New Zealanders of a lower income group and allow them access to technology otherwise unavailable to them.
Vodafone does not envisage a reuse market within New Zealand, due to the impact that second hand phones would have on their new phone market. They are, following initiatives handed down from Vodafone Global, now investigating opportunities in the UK for handset refurbishment and resale into countries such as Romania and recycling for the remaining phones.
Telecom use a specific handset technology (CDMA) that can only be used in New Zealand and some countries of the South Pacific. As a result their choice for endpoints for refurbished phones is more limited than for Vodafone.
Legislation
Telecom has found that a licence is now necessary in order to trade second hand cell phones within New Zealand, and chain of custody issues often arise as a result of this legislation. Vodafone are not required to obtain a licence as they plan to send phones overseas for resale.
6.4 Secondhand Dealers and Pawnbrokers Act
The New Zealand Secondhand Dealers and Pawnbrokers Act currently restricts revenues being generated by third parties in relation to used items. The intention of the Act is to restrict the illegal trading of high value items such as jewellery or electronics.
As it currently stands the Act prevents any refund from Shields to be paid to Vodafone. Under the Act, Vodafone cannot receive any dividend from used goods unless it becomes a licensed dealer. Vodafone has made decision not to apply to become a licensed dealer as it does not fit with its core business. Vodafone prefers to wait until current Ministry for the Environment work will help to resolve this issue for product stewardship initiatives. In the meantime, Vodafone propose to receive no funds from Shields. One other alternative (not currently proposed) would be for Vodafone to put refunds into the Vodafone Foundation or possibly "ringfence" the refund for advertising for phone take-back scheme only.
6.5 Parallel importers as free-riders
An effectively operating phone recycling scheme could affect competition as Vodafone handsets may be purchased from a range of suppliers and hence Vodafone is subject to competition from parallel importers. Telecom handsets must be imported from a specific US based supplier and so Telecom does not face any competition from parallel importers.
Potentially, having to support a phone take-back scheme while parallel importers did not would affect Vodafone's competitiveness with the parallel importers. Additionally, the cost of subsidising competitor handsets could make it less competitive with Telecom.
Although this is a potential issue for Vodafone, it must be assumed that this scenario has been included in the development of their business case for increasing phone take-back. That is, the benefits (customer contact, reputation, environmentally and socially responsible business practices) must outweigh the costs (of supporting the scheme) and risks (of losing market share to parallel importers). During the course of this study, Vodafone have not expressed any concerns regarding impact of their proposed scheme on their competitiveness with parallel importers.
6.6 Target setting
The analysis carried out during this case study supports the conclusion that cell phones do not constitute a significant waste management issue in New Zealand at this point. This situation could change, however, as a growing number of cell phones are disposed of at landfills.
There are significant "costs" associated with developing and implementing sector-specific targets. These include consultation to agree on a specified "value" and ongoing monitoring and enforcement. These costs need to be balanced against the benefits of such a target - not only in terms of diverting cell phones from landfills but, probably more importantly, raising general awareness of the issue and providing an opportunity for the private sector to "celebrate" as targets are reached.
Given the fledgling nature of the current Vodafone and Telecom phone take-back schemes and the current, relatively small volume of cell phones going to landfills, we do not believe specific targets should be developed for cell phones Given the tentative business case model for these schemes (that is tangible costs and non-tangible, though nevertheless worthwhile benefits), a prescriptive government approach to targets could detract from, rather than assist, responsible waste management for cell phones. This recommendation should be revisited in a year's time once the existing proposed take-back schemes are established.
The volume of e-waste, of which cell phones form a component, does constitute an issue for landfill space and generation of hazardous leachate. We believe that, at this stage, any initiative to develop targets (for example, diversion from landfills) should therefore apply to all of the e-waste products and not specifically to cell phones. The recommendation to set targets for minimising electronic waste per household (as opposed to specific cell phone targets) is consistent with the trends overseas for electronic waste, as described earlier.
If a target for e-waste is developed in the first instance, the situation for cell phones specifically could be continually monitored. If there is a growing concern that cell phones are creating unacceptable impacts at landfills, either from a space or a leachate contamination perspective, the need for a specific cell phone target could be revisited.
Any further developments on plans for target setting should refer to the lessons being learnt from the Packaging Accord where different organisations and sectors are contributing to the successful development and implementation of targets.
