But it doesn't help you when you can't just buy the phone outright. Modern smartphones, especially those that are locked into a particular carrier are ONLY available on contract.

Want a Palm Pre? Go into an O2 store and they'll say "You can't just buy the phone. You have to sign a contract". It's the same with the HTC Magic & Hero, most Blackberries, it will be with the Droid when it comes out, the HD2, everything (except the iPhone. A little while ago O2 started selling them on pay-as-you-go). Sure you can try eBay and places like that, but you'll pay a premium for something that's usually foreign anyway.

So yeah, getting a SIM-only contract is no good if you can't buy the phone separately. It's a sucky situation. In some other European countries it's actually the law that carriers are not allowed to sell phones only on contract - they HAVE to sell it SIM-free as well if they want to sell it at all...

But hey, at least we don't pay to receive text messages...

You guys should consider yourselves lucky that you have an early termination facility at all. Here in the UK there's no such thing, if you sign up for a 2 year contract then you're stuck with it for two years. Having said that you actually CAN end your contract early but it costs you the same as just running the contract's length (less tax).

For example: An iPhone 8GB means signing up for £35 a month for 2 years. To buy the phone and then end your contract early would cost £35 * 24 / 1.175 = £715.

That's $1,184. Or $1,400 before the global economic crisis. So yeah, you can't complain. :P