I seem to remember that the handset subsidy was allowed by the the Regulator at the start up of mobile phone Networks. Handsets were so expensive, as portion of average monthly earnings, that there would be very slow uptake and carriers would effectively have no business model.
That has now changed and handsets are far less expensive but carriers have held onto the subsidy model so they can capture punters with contracts for the "latest and greatest" - effectively distracting punters from assessing the best airtime deals around.
This is now distorting the business as those who don't bother to upgrade to the latest iThingy are still paying for the privilege (through airtime costs) of others who do upgrade through the inflated call costs under pinning the subsidy. Carriers are not charities they just off set the cost of subsidy over the airtime costs to all. Ask yourself why if you go for a SIM only deal do you still pay the same per minute as others who have a new iThingy subsidised handset?
In my view carriers should offer airtime contracts not tied to handset purchase (after all that's all the current arrangements are) then we will see competition in the airtime costs as opposed to the current "I give you the latest and greatest" selling rather than the cost of operating the phone.