Unlike the previous times, when it was compulsory to buy iPhone under a fixed tenure contract covering the user, the service provide and the mobile manufacturer, you can now actually purchase the iPhone without entering into the contract. However if you decide to buy the iPhone without the contract restrictions, you will have to shell out a higher price.
For instance, if you are a U.S resident you could have bought a 8GB iPhone bounded by a 2 year agreement for USD199. If you do not want to be bound down by the two year contract, you can still buy the same iPhone (8 GB), but for a higher price of USD599 from your nearest AT&T store.
Similarly in the U.K you can buy the iPhone 3G without being bound down by the contract of O2 you will have to pay approximately double the price of an iPhone covered under a contract.
Also note that in many countries , it is actually illegal to bound down the buyer by the need for entering into a contract. In such countries iPhone 3G is compulsorily being sold without any underlying contract.
What does this mean for a buyer ? Does it make any difference if you buy the iPhone 3G (without any contract) from the service provider or from the Apple Store.
Yes it does make a difference.
To begin with there might be a difference in the prices if you buy it from say AT&T and if you buy it from Apple Inc. (its not different here in U.S but it may vary in other countries)
However the most major difference occurs on how the seller sees it. If you are buying it from the service provider say AT&T, you can purchase the iPhone 3G from them without the contract only if you are also purchasing the AT&T connection. Further AT&T has also specified different prices for buyers who are eligible for an upgrade account and buyers who are not. However if you decide to buy the iPhone 3G from an Apple store you are free to choose your service provider. Moreover if you are purchasing the iPhone without any contract from the service provider, they will only give one iPhone per individual only. If however you are buying from the Apple inc store, you can buy as many numbers of iPhone 3G as you wish. Further to this, there is a difference in the way your phone is activated. If you are buying the iPhone 3G (without contract) from the service provider, you might have to pay the activation fees (most of the service providers charge that) and the activation is to be done at the back end by the service provider.
However if you are buying it from the Apple store, you can activate your iPhone online though the iTunes .
Now the question as to what is better, buying the iPhone 3G with contract or buy iphone 3g without contract ?
The answer to this would totally depend on what are the preferences of the user. If you have no preferences with regard to the service provider and find the services of AT&T in your are good and upto your expectations, there is no point shelling out extra bucks to buy an iPhone 3G. However if the answer is otherwise, you now have an extra option of being able to buy the iPhone without entering into any restrictive contract.