Erm, what free upgrade? When the 3G iPhone was released existing iPhone users on O2 were allowed to buy a 3G iPhone at the same price as new customers in return for extending their contract to run for 18 months from the purchase date of the 3G phone. Basically they were allowed to break their contract for free: not handed a free phone.
If we are really lucky the same deal will be available, but basically no-one know and it's entirely up to O2. Most likely there will be some sort of upgrade, but I can't see it being for all/any existing 3G iPhone owners: there will be some sort of minimal time that you're contract will have to have been in place for, say at least 10 months. Otherwise you could buy a subsidised 3G phone one day and get another subsidised phone the next day without O2 getting their money back from the contract which is never going to happen.
