I found it odd that the fine print just says iPhone 3G upgrades are spendy and I took a look at ATT's upgrade page for my account. Right now I'm being offered an upgrade to the existing 16G 3G iphone for $299. It's not cheap, but it's not as expensive as the fine print reads either. FWIW I've got one of the first gen Edge iphones, so perhaps that clause doesn't apply to me!