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AT&T Caves to iPhone Faithful on Pricing

Apple and AT&T iPhone pricing

AT&T today took steps that may help mollify customers unhappy over iPhone upgrade pricing, making the new model more affordable for some qualifying users.

Apple (NASDAQ: AAPL) unveiled the new iPhone 3G S last week to wide acclaim. But existing iPhone owners eager to trade up from their current devices complained when they learned the details: If they hadn't fulfilled most of their current two-year contracts, they would have to to pay at least $200 more than new customers would be shelling out.

The iPhone 3G S, which goes on sale in stores Friday, carries a price tag of $199 for the 16GB model and $299 for the 32GB device. Those prices, however, also require signing up for a two-year contract -- and they applied only to customers switching to AT&T or to existing customers who had fulfilled most of their previous two-year contracts.

All other AT&T customers would have to pay either $399 for the 16 GB iPhone 3G S and $499 for the 32GB model. The iPhone 3G S is also available without a two-year contract for $599 (16GB) and $699 (32GB).

The angry iPhone fans made it known they were unhappy with the arrangement -- complete with Twitter outrage campaigns and posts at Apple forums.

The new pricing announced today, however, gives users more time to qualify for a lower-priced upgrade, AT&T said.

Doing the math

Prior to the change, the carrier generally offered special upgrade promotions to subscribers who pay more than $99 a month for service plans and had completed between 12 and 18 months of their two-year contracts.

But because the iPhone 3g was launched just 11 months ago, few customers had qualified for the upgrade -- which meant they'd have to dole out at least $200 more than new users.

Under the new policy, customers who meet AT&T upgrade eligibility requirements in July, August or September 2009 will qualify for the discounted price.

"We've been listening to our customers," AT&T said in a statement. "And since many of our iPhone 3G customers are early adopters and literally weeks shy of being upgrade eligible due to iPhone 3G S launching 11 months after iPhone 3G, we're extending the window of upgrade eligibility for a limited time."

Through the promotion, people who pay more than $99 a month and are set to become eligible in the next few months will be able to buy the 16 GB iPhone 3G S for $199 and the 32GB for $299.

[cob:Special_Report]AT&T also said it and Apple would adjust the prices or issue credits for users who preordered their iPhones.

"If you pre-ordered an iPhone 3G S through Apple's online store, your upgrade eligibility will be reassessed based on AT&T's new upgrade policy for iPhone 3G owners," according to the AT&T statement. "If you are eligible for the lower price, Apple will issue you a credit for the difference as applicable."

While the effort may aim at satisfying the iPhone's rabid fan base, the change in policy also comes as AT&T -- along with other big-name carriers -- are facing scrutiny on Capitol Hill over their exclusive contracts with handset makers.

Several lawmakers have voiced concern about such deals, as well as the pricing of text messaging and overall consolidation in the market dampening competition.

Neither Apple nor AT&T had returned calls seeking comment by press time.