It's also legal for AT&T to boot you from their network and charge you an ETF.
Yes... it's in your terms and conditions that you agreed too. If you misuse the service you purchased (like any service) they have the right to "boot you" and charge you for the services used.
More than likely, AT&T will respond with a competitive program. That's what free enterprise is all about. Best side affect of Verizon joining in with the iPhone.