RE: who has ownership of the phone?
Simple, if the phone was sold to you, then YOU own it. If they claim part or whole ownership then it becomes a rental or hire purchase agreement - which would have required certain legally specified things to have been done. AFAIK, none of the mobile contracts meet the requirements.
The ONLY thing the company can "have you" for is breaking the contract that says you'll buy their services to 2 years (or whatever). But, as already stated several times, they are making a significant change to the contract which is detrimental to you - and therefore you are legally entitled to pull out of the contract.
All you have to do is tell them that you consider their contract term change to be both "significant" and "detrimental to you", and that you are therefore cancelling the contract. YOU are in the right here, so let them squirm, waste their time trying to 'upgrade' you to stay etc. You are entitled to terminate the contract, and you are entitled to a PAC and take your number to another operator.
They are NOT entitled to any compensation or early termination penalty for this as THEY have changed the terms. Now are they entitled to ask for the phone back.
The "magic words" are the Sale of Goods and Services Act and Unfair Terms in Consumer Contracts Regulations. Look them up, once they realise you know your rights, they will back down as they know they will lose.
If they are a pain, they are members of CISAS (http://www.cisas.org.uk/) and it's free (to you, it costs the company) to take a complaint there. What's more, unlike when I had a complaint with Orange, the company can no longer block you making a complaint by refusing to issue a deadlock letter.