[stevesimmons]

Or they buy the phone with a credit contract, as happens in the rest of the world.

If the major telcos only offer exorbitant interest rates, some other player will step in and offer the credit at better rates that fairly price the risk.

[skybrian]

The interest rate on a credit contract will depend on the default rate. Arguably, a phone company can offer loans on a locked phone for lower interest rates than anyone else could, because they can cut off service if the loan isn't paid, which is an incentive to actually pay it.

I'm not all sure this is a good thing, but I can see the argument for why it might result in lower interest rates on phones.

None of this is going to matter to people with good credit.