Exclusive U.S. iPhone carrier AT&T will, starting with new contracts on 25-May-08. On that date, 1- or 2-year contracts will have an initial $175 cancellation fee that will be reduced by $5 each month during the contract term - $60 per year. This is part of a trend among carriers to remove fixed cancellation fees.
Existing contracts won't see a change in their penalties. But based on previous offers made to me by managers at cellular company mall kiosks and freestanding stores, it's pretty easy either to get the fee paid by a company that wants you as a customer, or to have the fee waived if you have multiple lines, one or more of which has already gone free agent with the expiration of a contract.
AT&T has tried to provide the semblance of openness, a new meme for the cell phone industry prodded by several efforts on the part of Google, and notes in their press release that customers can also choose month-by-month plans, bring their own phones or devices and rent a SIM (Subscriber Identity Module) a month at a time, or use AT&T's GoPhone prepaid service which requires no contract commitment.