It is not a ripoff. That is part of the Mobile Share Data Plan. The pricing is for OUT OF CONTRACT phone lines that gives you a $25 per month discount for being out of contract.
AT&T and most of the other providers are no longer subsidizing phone costs. One way or another, you are going to pay for the phone, either by paying full price with NEXT over 20 - 24 months or by losing your out of contract discount.
In all of the Mobile Shared Data Plan advertising, it states, out of contract pricing.