$199 iPhone? Sure, with a 2-year contract

That's not a surprise given that requirement already existed. So Apple loses revenue sharing but gets the subsidy paid from AT&T. Seems like an odd trade off.

I also wonder if this means you'll be able to buy one for more money without the contract.

I don't understand the surprised face.

Would you (post author) rather pay $599 with a 2-year contract or $199 with a 2-year contact? Do the math.

rather pay 399 for 24 months of cheaper service costs. that 399 equipment cost can easily be lowered. buy refurb, buy used, marketing promotions from retailers, etc. but not much will lower that monthly cost.

tc;dr