Contracts definitely come at a cost. I got the Sprint MiFi exactly one year ago for $149 - $100 rebate with a 2 year contract. I got the $60/month plan for unlimited bandwidth.

Now, Virgin Mobile (owned by Sprint) has a version of the MiFi with no contract and a $40/month plan for unlimited bandwidth (http://www.virginmobileusa.com/mobile-broadband/mifi-2200.ht...). Since I'm locked in for 1 more year paying an extra $20/month, I'll pay $240 extra than I should.

I think the sort of person who thinks that signing a 2 year contract is the same person who would be paying $50-60/month for cellular service anyway. If you need (or just want) data and text messaging, plus relatively basic phone service, you will likely pay close to that amount no matter whether you are or aren't under contract.

Given that assumption, and if you expect that your life won't change in a dramatic way that will require you to drop your cell phone plan in the next two years, there's really no downside to getting a subsidized device.

For 90% of the market though, that adds a $200 cancellation fee to buying a device which requires a contract (or forces them to delay their purchase for months). So that $299 Dell Streak actually costs me $499 (because I have to get out of my current contract), and I won't be able to get it at $299 until like next June or something, by which point the market may (will) look different.

Phones and non-phone personal electronics are different market niches, because they attract different clienteles. Maybe in a decade when unlimited data is like $10/device that'll change, but for the foreseeable future, most non-upper-class people aren't going to have more than one phone contract per person.