$199 iPhone for you. Oh, and it has GPS.
Insiders have confirmed to Fortune
that ATT will in fact be subsidizing the cost on the new 3G iPhone, which will be released this summer. That means the $399 8GB will be only $199, and the $499 16GB model will only be $299 with an ATT contract.
It makes sense for Apple to not offer these rebates from their retail stores, perhaps with a mail-in rebate available from ATT on phones purchased from the Apple store. Of course T-Mobile users and non-ATT users won't qualify for the rebate - the point of subsidizing is to offer a lower price on a product in order to gain higher long-term revenue from subscription (i.e. - your $150 ATT bill
The insider also confirmed as has been rumored that the 3G version will have proper GPS rather than the cell tower based solution currently in place on the iPhone.