Re: O2, but not too
I think 10 years ago if you bought a phone outright you paid an inflated price, just like the price Hertz pays for a car used to be about 70% of the end user price.
Nowadays it's a bit more competitive.
My current solution is a Smarty SIM (no international calls though) and a Three PAYG SIM for the odd times I need it. It's working out around £7-£9 a month, for roughly what I was paying £15 for on contract.