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AT&T To Offer Contract-Free iPhone

The phone will work only on the AT&T network, though

By Mark Huffman
ConsumerAffairs.com

July 2, 2008

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It sounds almost too good to be true: Get a new iPhone from AT&T without having to sign a contract.

Well, there is one very hefty string attached. In order to get the service without the contract, you have to spend an extra $400 for the iPhone.

In announcing its new policy, AT&T said the iPhones without a contract will cost $599 or $699. It didn't say when it would start its new policy, only saying it would happen "in the future," which covers a lot of territory.

AT&T says the new iPhones, which will normally cost $199 and $299 with a two-year contract, are priced higher without a contract because that's the actual cost of the phone. AT&T says it subsidized part of the cost for contract customers, getting the money back over the life of the contract.

AT&T says it's offering the no-contract option in response to customer demand. Regulators and members of Congress have also prodded cell phone companies to be more accommodating to subscribers when it comes to early termination fees.

Even though you can get an iPhone without signing an AT&T contract, you will still have to use AT&T service. The iPhone remains locked, meaning it can't be used on other networks.

Since the early termination fee for ending a contract is normally $175, it isn't immediately clear if many consumers will pay an extra $400 just to avoid a contract.

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