I was going by a report I grabbed last year which asked what people did with their old phones when they upgraded.
About half sold / gifted their previous iPhone. About half kept it as a souvenir.
No doubt iPhones are passed down or sold more often, because they're more desirable when used.
At the same time, many of the people I know have enough wealth to not need to sell their old phones, and they keep their kids updated as well. (The only person I know who consistently has had to sell his old iPhone to upgrade, is my younger stepson. He needs the cash more.)
I remember seeing that report, or one like it. I suspected at the time (and still do) that the reality is that at least a third more are "repurposed" to friends, family or "second use"… My original iPhone moved into the role of "in-car iPod" for about 6 months after I "replaced" it, and before I bought a larger capacity iPod Touch. Then the 'car phone' went to mom, who decided she was finally ready for some modern telecommunication.
I know people who have upgraded their iPhones and still use their old ones, e.g. as a remote and a coffee table "portal" for quick-checking weather, googling something, etc. Even without a sim or active phone service, they are useful devices… and people will still download (including pay for) apps for THAT specific "home bound" device.
This is what counts in the long run, I think. Not only that they don't go into a drawer to gather dust, but can continue to generate revenue even when not in full service.
Edited by tribalogical - 5/16/13 at 2:11pm