[galadriel]

Well compare oranges to oranges then. Nexus 4 is $50 on contract on T-Mobile, and is definitely cheaper than iPhone 5 on any of the three networks.

Also, no law dictates that you have to sign a contract to get cell service in America. One can as well choose from few of the cheaper prepaid services.

[jmillikin]

T-Mobile charges $200 for a Nexus 4; at least, they did the last time I was in one of their stores. And if there's one thing the Galaxy Nexus has taught me, it's that any Nexus purchased from a carrier will provide a much worse experience than one purchased on Play (due to carrier malware and delayed software updates).

  > Also, no law dictates that you have to sign a contract
  > to get cell service in America. One can as well choose
  > from few of the cheaper prepaid services.

Equivalent service from the same provider is typically charged at the same rate, regardless of whether the customer has a contract. That's my point -- since there's no difference in service price, it's silly to say the phone is more expensive under a contract plan.

If you're comparing different service providers, then of course there will be some who have lower monthly rates and higher initial purchase prices. The tradeoff is that these providers usually provide much lower-quality service.

[galadriel]

No they do not. I personally use T-Mobile $30 monthly prepaid plan with 100 minutes/5 GB/unlimited text. The service is no way inferior to any regular service that T-mobile provides.

Whether you buy Nexus 4 from T-mobile for 50 bucks and pay more monthly bill with contract, or choose one of their prepaid plan and pay less TCO, the phone and software is exactly the same. I thought you would know this, you work at Google.

The cell companies do what you have effectively said before, they price differentiate based on who can pay what. Don't have money to buy phone upfront, well we will sell you for cheap and make the difference in contract rate. Have more money? Well then BYOD and get our cheaper prepaid services.

I will concede on one point, the big 4 (except T-mobile) make it incredibly hard for you to find and compare their prepaid services, for obvious reason that contract customer bring in more money over years.

[jmillikin]

  > No they do not. I personally use T-Mobile $30 monthly
  > prepaid plan with 100 minutes/5 GB/unlimited text. The
  > service is no way inferior to any regular service that
  > T-mobile provides.

By using this plan, you're choosing to save money by having very little talk time. That is most certainly an inferior service compared to the post-paid plans, which typically offer unlimited talk time.

[fpgeek]

  > Equivalent service from the same provider is typically
  > charged at the same rate, regardless of whether the
  > customer has a contract. That's my point -- since there's
  > no difference in service price, it's silly to say the
  > phone is more expensive under a contract plan.

First, you should educate yourself about T-Mobile's Classic vs. Value plans. For example, the individual "Unlimited Nationwide 4G" plan (also including unlimited talk and text) is $89.99/month for a Classic plan and $69.99/month for a Value plan. Why might that be, do you think? Do you think T-Mobile lets people save $20/month by saying the magic word "value"?

Second, even putting aside T-Mobile for a moment, there are plenty of other cost-of-ownership differences between a contract iPhone and a non-contract iPhone. For instance, absent additional coverage (e.g. extended warranty or equipment insurance), suppose you break it. How much will it cost to replace? If you haven't signed a contract, you have the option of signing one to subsidize the cost of a replacement, but if you have a contract, then what? Or suppose you take a trip overseas. Will you be able keep using your iPhone without exorbitant roaming charges by getting a local SIM? It depends. And so on.