Yes, it's the subsidized price (and promotional price to boot). For most consumers (in America) that doesn't matter much.
I understand the desire for cheaper non-subsidized prices, especially if you can't get subsidized prices, and I agree. I'm just saying for adoption of WP7, in America, I don't think price is the issue. Of course, if they could get the overall price down to where the "with contract" price was free or nearly so, like with most non-smart phones, it would be a game changer. I'm not sure that can be done and still maintain the hardware requirements specified by Microsoft, though. However, if anyone can do it, it would be Nokia.