It is true that contractual obligations drive down the consumer hardware cost. But, if subscribers had to shell out the actual cost of a new phone they may think twice and realign their priorities. Maybe those people in line at the check out paying for their groceries with some form of welfare, while at the same time talking on their cell phone, will realize a luxury item like cellular service is out of their means.
Unfortunately, though, a federal welfare program subsidizing the cost of cell phones would probably be enacted with a program to subsidize the cost of cable/satellite television soon to follow.
Fact of the matter is when the government gets involved they just screw everything up.