I saw an advert in one of the Sunday newspapers today from O2.
It is selling the 3G iPhone with a prepaid SIM for £350 (about US$540) for the 8GB version, with the price including a year's data access via 3G and WiFi (excluding roaming or voice calls). After 12 months, an extension is possible at an extra £10 per month.
Interestingly, this needs a dedicated SIM card (presumably to stop people swapping the flatrate SIM into other devices), and the service excludes the availability of visual voicemail. Roaming data in the EU is £3 per MB, and elsewhere at £6.
Full details are here .
Although very conspicuously, there's no link from the line "Unlimited text and minutes are subject to an excessive usage policy. Terms apply" to a web page detailing exactly what the policy and terms actually are. Which is slightly ominous, given all the other aspects have a "View More details" link.