AT&T (NYSE: T) is paying a subsidy of about $325 per 3G iPhone to get the price of a 8 gigabyte down to $199, according to Oppenheimer analyst Yair Reiner via an article in Barron’s. AT&T has acknowledged so far that the subsidy will hit earnings in the 10 to 12 cents range, but that it will be worth it because it will get the phone out to the masses and increase the company’s data revenues. AT&T’s mobile chief Ralph de la Vega has said $199 is a “magical price point” after seeing sales of the Motorola (NYSE: MOT) Razr double after its price dropped from its original $500 to $199. By 2010, the company expects the iPhone to be accretive to earnings. However, Reiner points out how extreme of a price cut this represents with the typical smartphone getting a subsidy of about $200. The higher subsidy rate “reflects AT&T’s faith in the iPhone’s ability to attract new subs and increase ARPU,” he wrote. In addition, AT&T will take an extra hit every time a subscriber is signed up in an Apple (NSDQ: AAPL) store and pay Apple $100, said Reiner, who estimates that the iPhone will sell 15.2 million in 2008 and 33.2 million in 2009.

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My colleague Dianne wrote a piece on how the subsidy was reversing a healthy trend in the industry in which consumers paid closer to the real cost of the phone. With this intense of a subsidy, it’s not only increasing subsidies in one instance, but will put pressure on the competition to also increase subsidies so that their phones can be similarly priced. We are already seeing that with Sprint’s (NYSE: S) Samsung Instinct, which costs $130—who knows what the subsidy is on that phone?