AT&T suggest downgrading old iPhones to iPods
Another alternative, and IMHO the most sad way, is to downgrade your iPhone as a WiFi-enabled iPod Touch. As what an AT&T spokesperson has confirmed that neither AT&T nor Apple will prevent de-activated first-generation iPhones for serving as surrogate iPod touches.
The spokesperson said: “If the [original] device is not re-activated as a wireless phone after you?ve upgraded to iPhone 3G, it will still work as an iTunes player and can access Wi-Fi.?
That would means old iPhones can still surf the web, check email, and browse the mobile iTunes store when connected to WiFi. Additionally, they’ll be able to function as a handheld gaming device and widescreen video iPod with calendar and photo functions.