the other person mentioning affordability got this right - this is to get more people to buy the phone, even those who can't/won't pay up front. The whole subsidy program is basically a loan program, with an indeterminate interest rate. The real solution is to offer both the contract price with/without this subsidy built in, so that you'll know what's the borrowing cost. But a few chinatown nyc shops can give you the approximate interest cost by giving you a rebate for buying the unsubsidized phone.
-Gene
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