Then there is a free phone. You don't pay a lower price if you refuse the phone, so it's effectively free.
There are contract terms (usually 2 years), but if you cancel, you pay the remaining value of the phone, so you still got some percentage of that phone subsidized by the carrier.
If your choices are:
A) Pay $45/mo. for service.
B) Pay $45/mo. for service and get a new phone.
Then there is a free phone. You don't pay a lower price if you refuse the phone, so it's effectively free.
There are contract terms (usually 2 years), but if you cancel, you pay the remaining value of the phone, so you still got some percentage of that phone subsidized by the carrier.