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Could iPhone Subsidies Be Apple’s Ticket to Mainstream USA?

I see no problem with it being subsidized. People can only get that price if they sign up for the lucrative contracte Apple wants. ATT subsidizes the iPhone, not Apple. That should drastically increase sales and Apples margins since they get the contract. Oh, and dont even think of crossing ATT by cancelling your contract and not paying the penalty! They are mean bastards! I had friends who worked for them, trust me.
But is this whole subsidy thing just a rumor then?