New $199 iPhone is Just $599

Fans of the newly announced $199 iPhone will soon be able to get it... for $599. Huh? According to a report on Reuters today, U.S. consumers who want the new iPhone but cannot or do not want to sign up for a new two-year contract with AT&T Inc will eventually be able to buy it for an extra $400... sort of. Maybe. Kind of.

Apple Inc has indicated that the new iPhone will go on sale July 11 at $199 for the model with 8 gigabytes of storage and $299 for the 16-gigabyte version. Of course, these prices apply to customers signing up for a two-year AT&T contract. For those non-iPhone owners who have not yet fulfilled their current contract or who may not be eligible for upgrades the price will be somewhat higher. A full video of all upgrade options is available here.

Note: Existing iPhone users will be eligible to upgrade to a new iPhone at $199 (plus an $18 upgrade fee) provided they bought their iPhone prior to July 11.

For existing AT&T subscribers not already using iPhone, here are the rules for eligibility:

Not all Cingular/AT&T customers may qualify for a cell phone upgrade. At this time, AT&T Mobility allows these customers to upgrade with no upgrade fee when they commit to a new 2-year contract:

• AT&T customers who have had 24 months of cell phone service since activation of their cell phone or since their last phone upgrade.

Certain AT&T customers may be eligible for a cell phone upgrade even if they have been in their current plan for less than two years (24 months), if they commit to a new 2-year contract and meet these eligibility requirements:

• Customer has had a standard calling plan plus data services costing at least $68.99 a month but no more than $98.99 a month, and who has been in contract (and not had a phone upgrade) for 21 months or more,
  or
  
• Customer has had a standard calling plan plus data services costing $99 a month or more, and who has been in contract (and not upgraded) in the last 12 months.

A customer with a calling plan and data services of less than $69 who is 21 to 23 months into contract may upgrade for a fee and a commitment of an additional two-year service contract extension. No upgrade fee is assessed for any customers who are on a month-to-month agreement.

Note that AT&T upgrade eligibility may be further limited based on customer’s usage history, payment record, previous phone replacement, etc. Upgrade eligibility is solely determined by AT&T Mobility at its discretion.

You can check your upgrade eligibility online. So there are three upgrade options for AT&T contract subscribers:

1. Existing iPhone customer can upgrade for $199 + $18 upgrade fee
2. Upgrade-eligible (see above) customers can upgrade for $199 + upgrade fee
3. Non-upgrade eligible customer can upgrade for $399
   

Those who don't want to be locked into such a contract, or do not have adequate credit (ie anyone who is recently under contract), can buy the iPhone for $599 or $699 as long as they sign up for some kind of AT&T wireless subscription, AT&T said on Tuesday. The ability to buy the phone without a contract doesn't necessarily mean that anyone can grab a new iPhone and unlock it (apart from eBay, that is.) What it means is that AT&T is trying to have its cake and eat it too, ensuring that anyone buying a phone from them also signs up or has some sort of wireless plan with the company (which of course they can do at a minimum and cancel after a month).

This may put a damper on the $199 news for some - but existing iPhone users who have been dying for the new technology are likely dancing for joy.