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ok, first, you have an HDTV, start using HD cables. the Red/White/Yellow are RCA cables and only display in standard definition, you could be getting WAY better picture quality if you used better cables. As for your black and white problem, it's either a setting on the tv or from whatever...

At the end of your contract you automatically switch over to month to month billing, you will get the same service you are now for the same price, you can just leave whenever you want. You can upgrade to a 3gs, but will need to sign a new contract if you want to get it at the subsidized price.