The only reason T-Mobile is doing this is because they have a ton of unused bandwidth due to low subscriber numbers, so they're trying to differentiate themselves from their competitors. Ultimately, it's much more profitable to use the subsidy model, because it allows you to hide the true cost of the phone from consumers, most of whom are too stupid/ignorant/rich to realize/care they're getting ripped off.
That's totally unfair. AFAIK, T-Mobile is the only major carrier to currently offer a reduced monthly rate in exchange for not taking the subsidy. If you're paying the some rate either way, you'd be stupid not to take the subsidy.
I think you are overstating the case against the subsidy model. It is hard to compare plans because they differ in small ways (minutes. texts, etc..), but my current ATT plan is 2 lines, 700 min, 200 texts, 'unlimited' data, and two iphones for $125 a month. I'd need at least the T-Mobile $60 plan to get comparable data, so it would be $120 a month; roughly the same price. More voice and texts with T-Mobile, similar data. But I get the phones with AT&T, so it ends being a slightly better financial deal. If you don't need voice, the $30 T-Mobile plan is an amazing deal.
You're making the assumption that we need to buy new phones every two years. Now that the smartphone spec race is starting to slow down, we're going to see less of a need for frequent smartphone purchases. You could easily use the same phone for 3 or 4 years, as long as it doesn't break. But when you're on the subsidy model, you have to pay extra for the subsidy even if you don't get a new phone.
He wouldn't break even after 4 years, though. Nowhere near close to it, actually.
Keep in mind that it's for 2 lines. So, with the T-mobile prices, that's $1300 up-front for two iPhone 5's(the iPhone's $650 MSRP is about average for carrier-subsidized phones), versus $400 for the two phones through ATT. So that means, over 48 months, for the T-mobile plan to be better, he needs to save $900 over that period. That comes out to $18.75 per month.
The $5 he saves per month, after 48 months, would be $240. That's half of the subsidized cost difference for one phone, but his plan has 2 phones. In that case, the ATT plan would have saved him $600 ($6400 for ATT for 2 $200 iPhones and $125/month for 48 months vs $7060 for 2 $650 phones and $120/month for 48 months).
In fact, at that per month price difference, it would take 15 years to make up the difference between the ATT subsidized and non-subsidized T-mobile.
With a T-Mobile value plan you can get 1000 minutes, unlimited texts and unlimited data for $100. That's cheaper, more minutes, and you can actually use text messaging. If you can get by with 2 gigs of data, it drops down to $80.
