Image: iPhone 3G
Apple Inc.  /  AP
AT&T Inc. will sell the new version of the iPhone without a service contract for $400 more than the price with a two-year plan, a break from the rules set when Apple Inc.'s popular touch-screen gadget debuted last year.
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updated 7/1/2008 12:23:15 PM ET 2008-07-01T16:23:15

AT&T Inc. will sell the new version of the iPhone without a service contract for $400 more than the price with a two-year plan, a break from the rules set when Apple Inc.'s popular touch-screen gadget debuted last year.

Two new models of iPhones go on sale July 11 for $199 and $299, depending on the amount of memory, with two-year AT&T contracts. The contract-free versions will cost $599 and $699 and will be sold sometime "in the future," AT&T said.

The phones sold under contract are subsidized by AT&T, which expects to make the money back through monthly service fees over the life of the contract.

Without a contract, users can cancel service without incurring an early termination fee. But both contract and contract-free phones will be "locked" to work only on AT&T's network, and the monthly service plans available will be the same, said AT&T spokesman Michael Coe. The plans add a $30 monthly charge for data like e-mail and Web surfing on top of a calling plan.

As previously announced, the cheapest monthly calling plan for the iPhone will cost $70 per month, before taxes and fees that can add $10 per month. That plan includes 450 minutes of calls and unlimited e-mail and Web browsing.

AT&T is working on providing a prepaid plan, Coe said. A prepaid option was available to buyers of the first iPhone who failed a credit check.

The new iPhones will have faster data access and more accurate navigation capabilities. The cheaper model will have 8 gigabytes for internal memory, half that of the more expensive model.

The first version of the iPhone was sold in the U.S. without a contract, but AT&T would activate it only with a two-year contract. Many phones ended up being "unlocked" from AT&T's network and shipped overseas.

Also Tuesday, AT&T revealed that the iPhones will go on sale at 8 a.m. local time on July 11. Last year's iPhone launch, which happened in the evening, had Apple devotees camping outside stores in anticipation.

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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