True, but they do have to cover the cost of providing you a voice / data network and it still works out cheaper. Say you get an iPhone 4 free on a 24 month contract at £45 per month that's £1,080. Take off the cost of the phone and that's £580 on the contract which is £24 per month for 900 cross network, anytime minutes, unlimited texts, 750mb data and unlimited wi-fi per month. It's still a much better deal than PAYG works out at over the same length of time. You can also drop your tariff down one slot per month after nine months with some networks. I started on £45 per month and I've dropped down to £35 per month now.