A Macrumors post confirms that my inferences from the two iPhone prototypes I saw in November were correct:
A newly published patent application reveals an abandoned possibility for the Apple iPhone. The patent details the methods for Apple to act as a "mobile virtual network operator" (MVNO).
When iPhone first connects to wireless network, it sends iTunes MVNO server it's ID and location, and get's back the information with the available networks, services and rates in the area.
Network selection can be done manually or simply based on the best price. All billing would have been consolidated under iTunes. The MVNO model would free Apple from any ties to any one particular mobile phone carrier and users would buy service directly from Apple. This possibility was discussed here on MacRumors back in 2005.
An earlier Wired article on the iPhone's origins had previously revealed that Apple was prepared to try to launch the iPhone themselves, if negotiations with Cingular (AT&T) fell through:
Apple was also prepared to buy wireless minutes wholesale and become a de facto carrier itself.
As readers know, negotiations were successful, and Apple launched the iPhone on AT&T exclusively. It's still interesting to see the other options Apple had explored in launching their own iPhone
I had leaned towards Apple having their own network and leasing time from AT&T and TMobile. I think the reason Apple went with AT&T is that AT&T has a HUGE number of stores across the United States. Just distributing 20 phones to each AT&T store and each Apple store sold nearly two hundred thousand handsets into the system at launch and insured proper activation and secured delivery. It was a far better resolution to go with AT&T exclusivity.