It's not really any different to now they're just making it easier to do the following dance.
1. Sign up for a 2 year contract with a free phone
2. After 1 year sell the phone you got for free and use that money to pay off the remainder of your 2 year contract
3. Sign a new 2 year contract with a free phone.
The difference is that 2. didn't provide you with enough money to pay off your contract then you get to spread the remainder over the next 2 years. Of course if you do this every 12 months you'll very quickly get to a sizeable monthly sum.
Of course if you can afford to invest the money in a phone upfront it's much cheaper not to bother with a contract, buy a nearly new phone off of ebay and go payg or sim only. I've had my current phone for a year and it has cost me £320 including my line rental so £27 a month for a smartphone, calls, texts and Internet. If I keep the same phone for another year then that will fall to £18 per month.