Next-generation iPhones likely to focus on internal improvements.
Apple Retail Preparing for iPhone 3G Activation Procedures
With the adoption of the subsidized pricing, iPhone 3G customers will be required to sign up for service at the time of purchasing. MobileToday notes that Apple's retail staff is unfamiliar with the process of signing up customers onto subscription contracts and also have no means to run credit checks. O2 is said to be working closely with Apple to allow them to perform these tasks.
Meanwhile O2 confirmed that "prepay iPhones" are also to be sold at Apple retail, O2 and Carphone warehouse. These unsubsidized prepay iPhones will not require a contract but are expected to cost around 350. The cost for a subsidized iPhone 3G from O2 ranges from free to 99 for the 8GB model and from free to 159 for the 16GB model depending on the service plan chosen. For reference, the original iPhone was priced at 269.