I saw this on cnn as well. I wonder how this will work? Why would you buy an iPhone directly from apple if it will be $200 cheaper to buy it from ATT? I wonder if apple will start selling unlocked phones?

AT&T will be splitting its kickbacks between Apple and the consumer this time. It is amazing, though, that Apple was able to convince AT

if this really happens, they'll sell lots more iPhones, I think ATT likes the revenue numbers they are seeing. If I were Nokia or RIM, I'd be very worried now.

The only reason to do this would be to allow an unlocked phone for other carriers. An Apple blessed unlocked phone would be a great thing. Right now, people STILL unlock the phones. AT&T needs to use the subsidy to encourage those doing the unlocking to stay with AT

But those revenue numbers would drop by, I don't know, $200 or so per phone, if they subsidize it.

It's about the subscription. they get a monthly fee from your for two years and odds are you will stay with AT&T because of the iPhone and thus maintain revenue from each subscriber as long term - this will pay off easily.

Besides, it's not about the one time sell price, it's about the long term service.

Wow, testurdo, you are a math genius. Wait, you're not; if you drop the price, you tend to sell more of a given item. At some price point is the sweet spot between sales price and volume which maximizes revenue. One also has to calculate the value of those additional subscribers over the two-year period of the contract. Nobody yet knows - since the iPhone is not even one year old - how many of those ATT customers will stay with ATT once their contract is up; however I assume that since Apple and ATT have a five year agreement and since the best features of iPhone can't be used on other networks, that a lot of those people will stay with ATT. I think ATT is quite willing to sacrifice $200 up-front in return for that ongoing stream of monthly income.

We lose money on every sale but we make it up on volume.

What! I paid full price and signed a 2 yr agreement WITHOUT a discount just 6 months ago! I demand a $100 credit or I'm going to start whining like a 6yr old girl! (And even if I get, I won't be happy!)

Since you can go in to ATT and get a "Free" phone if you are a new customer, then activate an iphone on your account, ATT is already subsidizing the iphone. A lot of people are doing this so they have a "spare" phone, or just sell it on ebay to offset some of the cost of the iphone. There is nothing wrong with it, and I have talked to ATT reps who say a lot of people do that. So now you'll just get the iphone $200 cheaper instead of getting a spare phone.