2G Upgrade Question

I gave my old 2G iPhone to my daughter back in September and she had it setup under a new AT&T account. The iPhone itself is a year and a half old. All of a sudden she is having all kinds of call problems. She is having lots of dropped calls and bad interference. I didn't get Applecare on this phone and it's obviously out of warranty. She would like to get a 3G iPhone. The question is - is she eligible to get a 3G iPhone at the $199 price? Her account is only four months old but the iPhone itself is a year and a half old. Any advice would be greatly appreciated.