Last month, Apple announced that its new iPhone 3G would cost just $199 for the 8GB version and $299 for the 16GB version. AT&T confirmed that pricing Tuesday, but clarified that those prices are only for certain users -- buyers of any iPhone before the iPhone 3G goes on sale July 11, new AT&T customers, or subscribers eligible for an upgrade discount.

For all others, the price is $399 for the 8GB iPhone and $499 for the 16GB iPhone 3G. In a new wrinkle, customers can buy the iPhone 3G without a service plan, but the price is steep at $599 for the 8GB iPhone 3G and $699 for the 16GB iPhone 3G.

AT&T also announced monthly service plans for the 3G iPhone, ranging from $69.99 for 450 anytime minutes to $129.99 for unlimited minutes. The plans include unlimited Web and e-mail access, but not texting. AT&T will charge $20 for unlimited text messages.

Those monthly service fees are higher than for the original iPhone. So will customers blink at those rates, even with a subsidized service plan?

New 'Value Proposition'

Tim Bajarin, principal analyst at Creative Strategies, doesn't think there will be much blinking. "I believe the new iPhone delivers a different value proposition via software, so the pricing plans will be viewed through the lens of its new software applications capabilities," he said in an e-mail.

Apple's iPhone 2.0 software will be preloaded on all 3G iPhones, AT&T said. The software supports a new ecosystem of third-party software and will connect to the Apps Store, Apple's mechanism for users to download software over the air.

Apple's Web site advertises that users will "find applications in every category, from games to business, education to entertainment, finance to health and fitness, productivity to social networking." And it boasts that the apps will exploit iPhone technologies...