It looks like the iPhone 3G is going to be a huge hit in the UK.  Whilst the total cost of ownership over the contract period is pretty similar, the reduced "Price of Entry" looks like it's going to boost sales massively...

"Consumer interest in the 3G iPhone is almost four times more than interest in its 2G predecessor, according to O2, Apple's exclusive UK network partner for the device.  More than 130,000 people have pre-registered their interest in the combined handset, digital music player and web browser on O2's website since the phone was unveiled a week ago.  Only 35,000 people pre-registered their interest in the previous phone between its unveiling on September 18 last year and November 9, when it went on sale in the UK...

Source: www.telegraph.co.uk