Image: Apple iPhone 3GS
Apple's iPhone 3GS, released last year, and an older model, the 3G, are being sold without contract by Apple, although AT&T still is the service provider.
updated 3/23/2010 10:06:49 PM ET 2010-03-24T02:06:49

Apple is making some of its iPhone models available at full price without a contract from AT&T. However, the new phones are still "locked" to AT&T and will not work with any other cellular carrier unless they're modified.

Web site Gizmodo shared what appears to be an internal memo from Apple dated March 22 that says "Effective immediately, customers purchasing an iPhone as a device only at full price are no longer required to have an AT&T account."

The carrier is currently the exclusive provider of the popular smartphone in the United States. Apple was contacted for comment Tuesday, but did not respond. A sales representative at an Apple Store confirmed the phones could be purchased without a contract, but said they would still only run on AT&T's service.

"We have no comment on the reports," said an AT&T spokesman.

The Apple memo specifically refers to the two older versions of the iPhone, the 3G and 3GS, and not to any new model, which could be due out in the months ahead.

$400 more without contract
According to the memo, both the iPhone 3G, released in 2008, and the iPhone 3GS, released last summer, will sell for full price: $499 for the 8-gigabyte 3G model, $599 for the 16 GB 3GS and $699 for the 32 GB iPhone 3GS. Those prices are $400 more than if the devices are purchased through AT&T with a contract and a subsidy.

"The only benefit I can see to that is the ability to put your phone up on eBay before two years are up," said Avi Greengart, consumer devices research director for Current Analysis.

AT&T took a similar step last spring, when it said it would start selling iPhones without requiring a two-year contract, also at a $400 price difference.

The decision by Apple could mean it's looking for a way to reduce its older iPhone inventory while it prepares to release a new version.

"I don’t think it would have much impact on that," said Ross Rubin, director of industry analysis for The NPD Group research firm. "That might open the door to some more gray market acquisitions, but that’s generally not the kind of thing Apple wants to encourage."

According to the memo, customers can purchase only one iPhone a day at full price.

In the United States, AT&T has been the sole provider of iPhone service since the phone went on sale in 2007. Its exclusivity agreement with Apple is due to end this year, and neither side has said whether that agreement will be extended.

Rubin said he doesn't think the sans-contract option is a slight at AT&T, "particularly with the iPad launch" next month. Apple has said its 3G version of the new tablet will run on AT&T's network.

"It seems they remains partners with AT&T," he said.

iPad connectivity option
Meanwhile, Clearwire, which is providing Sprint's 4G, or fourth-generation, wireless network, said Tuesday that purchasers of Apple's iPad will be able to use its network for Internet connectivity.

The iPad, with a Wi-Fi only version due out April 3, can run on Clearwire's WiMAX network, using a mobile hotspot, a Clearwire spokesman said. So far, WiMAX is available in 27 markets around the country.

The mobile hotspot, called the Clear Spot, costs $139.99 to buy, or $4.99 a month to lease, and there is a monthly charge of about $40, said Mike DiGioia, a spokesman for Clearwire.

"It costs a bit more than the 3G service, but the 4G service offers faster speeds — 3 to 6 megabits-per-second downloads, with bursts over 10 megabits per second — and is flexible in that it can be used with many devices," and not just the iPad, he said.

Service plans "don't have usage caps and contracts aren't required, though there are often discounts for people who sign a service agreement," he said.

Another version of the iPad, with both Wi-Fi and 3G, is due out in late April. Apple says no contracts will be required for the device to be used on AT&T's network.

AT&T will charge $29.99 a month for "unlimited use" and $14.99 a month for up to 250 megabytes.

The Wi-Fi-only iPad will cost $499 for a 16 GB model, $599 for a 32 GB version and $699 for a 64-gigabyte model. It will cost an additional $130 for iPads that also come with 3G.

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