you pay for what you get. this model applies to having a cell phone period. so if anything i would argue that ppl should not have a cell phone and a cell phone plan. and instead of owning a car they should walk everywhere. and candle light everything in place of electricity .

screw modern day convenience .

p/s.: this isnt a master plan hatched by steve jobs.

@owbert - 

Thanks for replying! Sadly, this truly is a product of the new profit-sharing model agreed upon by Jobs and the schmucks over at AT&T. Jobs had to abandon this approach to continue talks with China Mobile about entering the Chinese market.

The money not being made by the lowered upfront cost of the iPhone is being compensated for in the slight, but noticeable, increase in monthly charges by AT&T. This will improve market penetration, and Jobs (being the genius marketer that he is) is following one of the fundamental laws of marketing: consumers are always more willing to pay in installments over longer periods of time.

With that said, the purpose of this post was not to implicate any one person, but rather to shed light on the true costs, in full, of entering a new plan to get one's hands on this wonderful device.

I still cannot wait to get my iPhone 3G in October when my plan with Verizon expires :D