Lots of people think a top-of-the-line iPhone costs $199.99. Lots of people are wrong. The iPhone 6 costs $649.
This misconception owes to mobile carriers’ longstanding practice of offering discounts on phones for customers who agree to a two-year contract. For years, the deal was generally this: You go to a company like Verizon or AT&T, you sign some paperwork locking yourself into 24 months of wireless service, and Verizon or AT&T gives you a shiny new phone at a subsidized price—or even free, if you opt for less than the very best hardware.
The carriers could afford this subsidy because they’ve locked you into a contract. This is the genesis of the dreaded Early Termination Fee. ETFs let the carrier recoup the costs of that hardware subsidy should you renege on your side of the deal before your two-year commitment is up.
But mobile carriers have long been flirting…
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