Because the cost of the iPhone is subsidized and the cost recouped by AT&T via the monthly plan, they're not selling the new iPhone 3GS to those who bought an iPhone in the past year or so at the subsidized price of $199/$299. If you want the latest and greatest, you may have to pay $399/$499 depending on which model you get. You can read more in an article in TidBITs. By the way, this article offers the best overview I've seen of the new iPhone. It's definitely worth a read, as is their excellent overview of the new iPhone 3.0 software.