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Re: 2-yr Contract Extension Subsidized Phone
1) A new contract will be for a plan that's currently available. (Which is usually to your advantage, since data is becoming cheaper every year, voice and text are usually free, and the base price competition keeps that down.) If the plan you're currently on is still available, you can keep it.
2) Whether you need a new SIM depends on a) whether the new phone takes the same size SIM as the old phone and b)whether AT&T phones need a different SIM when you renew your plan. (LTE needed a new SIM in most cases.) That's not anything to worry about though, because 1) the phone comes with a SIM and 2) AT&T doesn't charge for SIMs (unless, maybe, you just want to buy a spare one or you physically broke one). Carriers usually don't charge for new SIMS (unless, maybe, you want to buy a spare one. Even when I switched phones for a short time [to a rugged one when I went on a camping trip], AT&T gave me the extra one free.
3) The system can tell by the phone's IMEI, but you can buy a new phone from another source and pop your SIM into it without telling AT&T anything. When you get a subsidized phone, you're getting it from AT&T, and they put that information into the database, which is how the system "knows".