The AT&T store rep was first saying that there categorically is not going to be a hardware refresh... just the OS update.
Correct! Hardware update is pure rumour and conjecture!
To which I explained I just spent $300... I don't want to turn around and spend another $300 when the new iPhone comes out. He then said I could return it and revert back to my old phone and then get the iPhone after the hardware picture works itself out but then I wouldn't get upgrade pricing on another iPhone... I could only get upgrade pricing on a different phone. I'd have to wait the 1.5+ years out to get upgrade pricing on an iPhone.
I then spoke to a manager and he gave me the same story. It seems returning an iPhone negates your ability to later get upgrade pricing on one until the appropriate amount of time has gone by. I sent a few emails to at&t customer support to ask about that as well but got nothing back (haven't looked at my contract to verify if what they said was true or not).
I'm not familiar with AT&T's contracts. In the UK, O2 contracts appear to be simpler - and cheaper! However, wherever you are the principals are the same. When you sign a contract for a 'phone, you agree to pay a (reduced) fee for the actual 'phone and thereafter, for an agreed length of time, to make monthly payments to the network provider. The monthly payment covers call time, web browsing etc etc together with (on cheaper contracts) a small cost to cover the balance of the cost of the actual 'phone. In return, the network provider agrees to furnish you with the relevant network facilities and maintenance of the 'phone. At the end of the contract period, you can either continue the existing contract - at a reduced rate because the 'phone has now been paid for - or you can retain the original 'phone and take out a further contract for a new one.
Should you wish to cancel the contract before the agreed time,
(this is what I gather you wanted to do.) you are, in law, effectively breaking it. The only way you can do this to pay it off by way of a "penalty fee" which usually consists of a percentage of what you would have paid should you have completed the original contract. You are then free to purchase a new 'phone and start a new contract.
Obviously, different providers have have a multitude of schemes to cover early contract completion, but, in essence this is the usual procedure.
Hope this helps