Like I mentioned, that's still better than paying $649 for a no commitment iPhone.
You still don't understand. When you purchase a new iphone every year it is under contract, is it not? So you are paying $120 more for a 16GB iphone under contract because of your dummy line. If you just waited an extra 9 months or so you would get the phone for $199 vs. $320. Most carriers will waive the early upgrade charges if you are within 90 days.