Here is where the carriers are really making the most money. When you buy a new phone from the carriers, you sign on to a 2 year contract. This is so that the carriers can spread the cost of the subsidized phone over the course of the contract. The gotcha, is that after the contract is up, and the carriers have recouped their subsidy costs, your bill does not go down. So if you keep your phone for 3 years, you are still paying the carrier for the subsidy costs that they recovered in the first 2 years.