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I just completed the downgrade with e3flasher using my iphone 2G, and yes it had to be jailbroken. If you want details let me know. Its actually really easy to do provided you don't have to spend HOURS on the internet figuring it out. If I give you the steps you should be able to use your phone for everything and save some money.
Just make sure its jailbroken with rednsn0w
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