kind of... It was 'with contract' in that you had to bring it home and activate it with ATT. There were no other options. As far as I know, Apple wasn't paying any subsidies to ATT at that time. That was part of how they could drop the price a few months later.

I believe it was only after the next model came out that they started paying subsidies to ATT. That was how they got the price to 299 and 199.