I’m tired so only the most important details:
Existing contracts will be replaced by new 2-year contracts, regardless of when you signed up. This is pretty much what happened last time. It’s like this perpetual relationship with AT&T. Every time an iPhone comes out, you’re stuck in 2 more years of purgatory.
A $199 iPhone means subsidies which means you will only be able to buy the iPhone from AT&T, apparently. No more purchases in Apple Stores, including the online store which is now pointing buyers to AT&T.
The “unlimited” data plan goes up by $10 per month and Apple is no longer getting any monthly cut.
There is no “no commitment” price now. You can’t just walk into the AT&T store and plunk down $500 and walk out with a phone. No 2-year contract, no phone.
Since you will buy the phone in the AT&T store, you will also activate your phone there. This plus the above point should eliminate completely the use of iPhones on other networks other than AT&T (at least in the United States).