Well, that’s what people are saying but Steve Jobs didn’t say that they were contract prices. I believe that they are the actual phone prices because Apple would like to reach their goal of 10 million iPhones sold by the end of the year. I’m sure they’ll do this but at the WWDC Keynote Presentation that Steve Jobs gave he said that 56% of the people who wanted to get an iPhone but didn’t was because of the price. This will definitely solve that problem.
Also, there are some blogs saying that if you buy the iPhone you MUST get a new 2-year contract but the iPhone users who already have a 2-year contract will be able to override it with a brand new 2-year contract. For example, if you bought the iPhone on June 29th, 2007, you will have already used 1 of your two years on your contract. If you buy the iPhone 3G, you will get a brand new 2-year contract and must stay will AT&T;until 2010. So, instead of being stuck with them for 3 years, you are only stuck with them for 3 years. Also, if you bought a 2G iPhone after May 27th, you wil be able to trade the 2G iPhone in and get a brand new 3G iPhone but still continue with the 2-year contract that you got your 2G iPhone with. This is pretty much what I think is going on with the contract situation.
But if your bummed out about sticking with AT&T;, you can buy the 3G iPhone for the price of $199 and pay the $175 contract cancellation charge and end up paying just about the same as an old 2G iPhone would.
If you want to read more about just check out The Unofficial Apple Weblog They Have almost unlimited resources about the iphone.
Glad to help