When I researched replacing a stolen iPhone I was a bit surprised to learn that AT&T offers high value (corporate?) accounts a contract extension and subsidized iPhone upgrade as frequently as every 12 months. I did know that even a non-elite account are often eligible for subsidized iPhones (and contract extensions) after 18 months; 6 months ahead of the official end of contract.
This is surprising because AT&T probably pays Apple something like $550 for a 4S with a contract-price of $300 4S . (I'd have to pay $750 were I to buy the same phone without a contract). Assuming AT&T gets a margin of $40 a month from each iPhone customer, it would take 6-7 months to start making money on the deal -- and a yearly subsidy means only five months of profit. (Customers who don't upgrade their phones on contract termination, but who stay with the AT&T's pricy plans, are pure profit. Carriers probably have rude nicknames for them.)
So why does AT&T offer this early renewal option at the same time that they're hiking upgrade fees (from $20 to $40 recently), SMS fees, and capping data on "unlimited" plans -- even as Apple kneecaps them with iMessage and FaceTime?
Presumably because, until recently, they thought they didn't have a choice. If AT&T reduced their subsidies, Verizon would take their customers. That's how competition works. The only way to escape this trap is to collude with competitors, so everyone agrees to confront Apple at the same time.
Collusion is, of course, illegal. I assume there are ways to do it though - certainly airlines seem to manage it. Signaling intent by coordinated media leaks for example (emphases mine) ....
The commentary by wireless operators is likely to be decidedly more firm in how they plan to continue to hold back the rising phone upgrade rates that are hurting their margins. Even weak operators like Sprint, which has a large contractual commitment with Apple, will likely experience a decline in iPhone sales based in part on changes to its upgrade policies last year. They will not be alone as we expect a similar trend at Verizon, Deutsche Telekom, Vodafone, America Movil and Telefonica, to name a few. In the United States, we expect iPhone sales to decline 4 million sequentially to 9 million with the largest impact coming from AT&T, Apple's largest customer.
Coordinated price increases are a tricky business, but clearly the carriers are desperate. Since Google's Android margins are almost zero, the carriers can't extract much money from them. They must be hoping that Microsoft/Nokia will save them, in which case I wonder if they'll offer Lumia contract upgrades before iPhone contract upgrades.
It's going to be interesting to see how this plays out, and how this strategy fits with AT&T's newly less restrictive unlock policy (aligns with Verizon). AT&T is making it curiously appealing for iPhone customers to move somewhere, anywhere, else.
Of course Apple has options too. They could respond by promoting pay-go options and cutting the cost of an unlocked iPhone to, say, $600. In that case, many of us would do what smart Europeans do -- buy the device outright and pay much less in monthly fees.
A dangerous road ...
 I am making these numbers up using some half-educated guesses. If you know some real numbers send them on! I couldn't find any, it's highly proprietary information of course.