I see a lot of people complaining they're not getting the full discount so I'd like to point out the math. This is probably two of the worst case scenarios for AT&T (not counting student/corporate discount, etc):
450 min : $40
200 MB: $15
1 Year: $660
2 Years: $1,320
Family Plan (5 lines):
700 min (1st line): $60
4 add'l lines: $40
5x 200MB: $75
1 Year: $2,100
2 Years: $4,200
Now . I don't know by how much exactly AT&T subsidizes each phone. Let's just assume it's the same as the ETF ($325).
For the individual plan, when you sign a 2-year contract, AT&T expects to pocket $995. How much of that is profit and how much goes to expenses (system maintenance, upgrades, etc), I have no idea. However, if they let you upgrade in just 1 year, then they only get $335 in revenue (not profit).
For the family plan, when you sign a 2-year contract, AT&T expects to receive $2,575. However, if they let you upgrade all 5 lines in just 1 year, then they only get $475 (or $95 per line per year) in revenue.
You can see AT&T's dilemma. With the current system, if they offer early iPhone upgrades, they'd likely have to offer it to everyone - even those on the lowest plans.
The main issue here is the lack of transparency. I'm sure there are several folks who would be happy to go with a higher plan if that means they can upgrade their phones earlier. I think all carriers should move to a different system than giving outright, flat-rate equipment subsidies. Or, given Apple releases a new phone every year, bring back the 1-year contracts (with higher device prices, not to exceed 1/2 of the ETF).