I canceled the AT&T service for my iPhone as planned and the iPhone seems to work just fine as a wifi-only device. Excellent!
I reset the iPhone, synced, etc. and it still works without service. No guarantees that it will continue to work, but for now it looks like I’ve got the video iPod and iPhone test device I was hoping for.
Per AT&T’s terms of service: If you cancel your AT&T service within 30 days you do not have to pay an early termination fee; and if you cancel within 3 days you get a refund of your activation fee.
Pretty good scoop ... this is expensive and slightly deceptive ... but still interesting. I would imagine Apple will close this loophole soon.
Other websites popped up speaking of more complicated ways to achieve a no contract iPhone, but this seems to be the most simple way.
Once the iPhone is hacked to load a version of Skype - I see lots of people WANTING this kind of iPod.