Lots of people are noting that we sign these contracts willingly and that the phone is discounted because of the two-year contracts we sign. Many are overlooking two key facts:
1) There's a huge cancellation fee that makes up for the discount on the phone. ATT is up to $350 for cancelling a smartphone contract.
2) Wireless markets are constrained by government-granted monopolies. Monopolist have huge amounts of leverage on their side. Yes, you can buy the phone without a contract...and pay a huge margin on it. You're ostensibly free to go elsewhere...and find the same deal. The numbers are little different (T-Mobile charge $200 for cancelling early). But the structure of the deal is largely the same.
We congratulate ourselves on our free and open markets and put huge political pressure on other countries to do the same, but when you look under the hood we create vertically-integrated monopolies. Who in their right mind would give the same company control of: a) the means of delivery (airwaves or wires), b) equipment to access the service, and c) sale of content to use the service? We broke up Ma-Bell specifically for just this reason. We very nearly broke-up IBM and Microsoft for the same. But for some reason communication services (cellular and internet) are handed over on a silver platter to corporations.
And then we write criminal laws to protect their monopoly.
Is it fair in any meaningful sense of the word? I don't think so.