According to the Associated Press, AT&T has confirmed yesterday's rumor that they will begin offering no-contract iPhone 3Gs to existing mobile customers. The phones will be priced at $599 for the 8 GB model and $699 for the 16 GB model.
The new phones will still be "locked" to AT&T and won't work with any other cellular carrier unless they're modified. AT&T will only activate them on the regular iPhone plans, which include a $30 monthly charge for data access. Prepaid service will not be available.
Apple declined to comment about whether they too would begin offering no-contract iPhone 3Gs.