Question about "upgrade eligibility"

[MBHockey]

I'm hoping someone can let me know if this will work.

My family member's Verizon contract ends in the 3rd week of June and wants to get the new iPhone (I currently own a 1st gen iPhone). He gets 30 days to port his number to AT&T (this is his #1 priority) and i'll be going with him the end of July to pick up the iPhone 3G.

I want to have him start a contract with AT&T with some cheapo phone that I will pick up off of eBay in the days following the expiration of his Verizon contract. He will start a new contract with AT&T and port his number over to this cheapo phone. My question is...since he didn't pay AT&T a subsidized price for a phone to start this contract (the one from eBay), would that make him "upgrade eligible" for the iPhone 3G so he can get the $199 price point?

I mean, at what point in a contract that you supplied your own phone are you considered "upgrade eligible"? It seems at any point you should be since you never got the "deal" on a phone from AT&T (as long as you also renew your contract another 2 years, of course)...but is this not the case?