iPhone upgrade breakdown

There seems to be some confusion surrounding the leaked AT&T policy documents that Gizmodo obtained earlier today. Because AT&T may be selling unsubsidized phones (though please note that it appears that even unsubsidized phones will have to be activated with an AT&T voice and data plan in-store), existing AT&T customers are understandably confused about their upgrade options.

Assuming that the memo is real and that AT&T's policy won't change between now and July 11, this is the situation:

If you are a current AT&T customer and you have a 2G iPhone

Take a deep breath, you can get the new iPhone 3G for the new lower price (starting at $199.99), as long as you sign a new two-year contract and add-on one of the new required data plans.

To quote from the AT&T memo:
When the 3G device launches, all active postpaid customers in good standing with a 2G iPhone will be eligible to receive the qualified upgrade pricing for a 3G device regardless of service tenure. (Customers that would not otherwise be eligible due to tenure will be made eligible at launch).

So if you bought an iPhone in June of last year -- you can upgrade to the new 3G phone. If you bought an iPhone in May (maybe you were the last person in your city to buy one), you can still upgrade at the lower price.

If you are a current AT&T customer and you do NOT have a 2G iPhone

You may or may not be eligible to buy the iPhone 3G at its lower price upon release. It depends on the length of your contract, the time of your last handset upgrade and anything else that weighs into AT&T's standard upgrade policy. The pricing for non-qualified upgrades has not been determined, but phones will still need to be activated in-store and with a data-plan and two-year contract.

If you are a new AT&T customer

Assuming you pass the credit check (Pre-Paid and Pick-Your-Plan are not eligible for the iPhone 3G), you can get the iPhone 3G for the new lower price. You will be required to sign up for a two-year contract and a voice and data plan.

Cancellation policy spelled-out

From the AT&T memo:
To cancel service within the first 30 days, the customer must return their equipment to the place of purchase (no exceptions). If the customer cancels service after 30 days, they will be charged the ETF. The customer is not required to return the device to cancel after 30 days.

So you have 30-days to return your iPhone 3G and your service will be cancelled as soon as you return the device. After 30 days, you can keep your phone but canceling service will mean you are responsible for the the ETF (early termination fee), which is usually several hundred dollars.