INSIGHTS
AT&T's Odd iPhone Offer

My first reaction: Something must be missing.

Second reaction: Why would anyone pay more for the iPhone if there's no additional benefit?

No Contract, Still Chained to AT&T

That's a $400 option.

It could be worth the cost if you really dislike AT&T's service and wanted to use the phone on another carrier. However, you can't.

Both the iPhone 3G "contract" phones, which go on sale July 11 for $199 and $299, and the contract-free phones will work only on AT&T's network , spokesperson Michael Coe told The Associated Press.

AT&T's early-termination fee is a maximum of $175 and, as of May 25, that fee is reduced by $5 for each month you own the phone. That's a lot less than $400.

Why would you do this? When I asked an AT&T spokesperson, she said it is an option for people who don't want to sign a contract. We agreed someone really must hate contracts to spend more than twice the termination fee for this privilege.

SIM Possibilities?

Perhaps the iPhone has a removable SIM card. That's what an "unlocked" phone offers, meaning you are not tied to any specific wireless carrier. However, the first iPhone was made so the SIM card could not be removed.

With a traditional "unlocked" phone, you pay more for the phone because it is not tied to a specific carrier and, therefore, it is sold without the usual subsidy. Many people, this blogger included, have bought phones this way.

Unless AT&T or Apple (Nasdaq: AAPL) is not being entirely forthcoming here, I can't understand why I would pay $400 more if the phone is still locked to AT&T's network.

What am I missing?