16GB iPhone upgrade doesn't extend contract

...If a new iPhone doesn't extend the contract and thus, effectively two phones may have been bought under the same contract, the contract is NOT subsidising the cost of the iPhone. So the retail price IS the total price? This raises a question about the pricing of unlocked iPhones in certain territories, doesn't it?

You need to deactivate the old phone and activate the new one to replace it if you don't want the contract extended, so . . . no.

It's common knowledge that the iPhone price is not subsidized. There shouldn't be any question about the pricing of unlocked phone because it's gray market and they can charge you whatever they want to make a profit on what they paid for them. Now if you see those unlocked iPhones CHEAPER than what AT&T and Apple sells them for, then I'd be curious about that as well.

Once again, iPhone is a fully subsidised phone, just like all other phones that come with a plan. Unlocked iPhone can be legally bought in jurisdictions where law requires such option (France, for example), and its price is 749 euros. If we were to scale the price ratio to the US dollar, if it were offered in the US, it would probably cost around $850. The difference of $450 between the locked (2-year contract) and unlocked, contract-less phone is more-or-less exactly the amount of subsidy AT&T is paying to Apple.

There is only one thing that is a bit unclear here, and that is, what happens to the old iPhone (other than it being deactivated)? Does the owner have to return it to AT&T/Apple? Does it become a brick? If so, presumably, an creative owner could just have it reactivated using a hack, then jailbreak it, unlock it and use it elsewhere / sell it for a lot more.

For those who love picking nits (i.e. nitpicking), 749 Euros at today's exchange rate, equals US$ 1,085. However, retail price for the locked, subsidised iPhone in France is 350 Euros, which is about US$ 507. As we all know, due to the slide of the US dollar against the rest of global currencies, prices of same goods in the US became lower than they are in the rest of the world. This is why iPhone cost significantly more in EU than in US.

It's common knowledge that the iPhone price is not subsidized. There shouldn't be any question about the pricing of unlocked phone because it's gray market and they can charge you whatever they want to make a profit on what they paid for them.

The gray market is only in areas where the iPhone isn't sold as a separate product (as mentioned, certain European countries insist on the option, but don't insist that they charge the same price).

Whether the phone is technically 'subsidized' is immaterial. Apple wants a specific profit margin for the phone. Basically, they want to make $600 or so. So they charge $400 (or whatever it costs these days), and get the rest in AT&T kickbacks over the life of the phone (and don't think this stops after two years, they probably get money for the life of the usage). Just $9 a month makes the total value over $600 (not sure if we know exactly what Apple gets, but speculation has suggested 8-10 dollars).

The unlocked price in Europe is so high not just to cover the 'true' cost of the phone, but also to dissuade those who might think about it, because, come on, the phone companies want your monthly dollars as well, you know.