Time to bring you some more news firsts, since we've tracked down the iPhone 3G PAYG release schedule and price brackets...
In what is likely to be a couple of major disappointments for the contract-phobic, I can reveal O2 plans to charge the princely sum of approx. £350 for the 8GB iPhone 3G on PAYG. Furthermore, a 16GB PAYG iPhone 3G will come in at between £450 and £500 and won't be released until "two or three weeks later" according to my source.
Interestingly, what I have also learnt is that the delay behind the PAYG announcement has come due to uncertainty at the network over not only what to charge, but also how to position its launch. Consequently, O2 has decided to "test the water" (the words of my source) with the 8GBer and gauge public reaction for a few weeks before it hits people with the 16GB edition and possibly some pricing tweaks (hence the £450 - £500 price bracket).
In short, I think it's probably fair to say demand will be low - especially considering the from free contracts now on offer. Of course, in another light these prices are not extortionate compared to other fully fledged non-contract smartphones (of which the iPhone will be one with firmware 2.0) but it must be noted these iPhone's will not be unlocked, just contract free.
Ultimately then this seems to fall in line with the reasoning behind buying any standard handset unsubsidised and contract free: Why bother...?