It makes perfect sense if your carrier agrees to charge you a lower rate in exchange for not taking the subsidy. Otherwise you're just paying twice.

T-Mobile is the only major US carrier I'm aware of to offer this, (though it's kinda buried on their site): http://www.t-mobile.com/templates/generic.aspx?PAsset=Pro_Pr...

I know, I signed up for an ATT plan soon after landing in US, I already had a GSM Phone that I wanted to continue using. However, choosing to use my own phone did not reduce my phone bill in any way nor was i offered a cheaper plan.

So, why not take the free phone that comes with the contract anyway?

It's much easier to get a month-to-month contract when you're not getting the free phone. That in turn gives you nice leverage when you call to cancel in four months, complaining that you're paying too much.

^ This.

Except on T-Mobile, whether you need it or not, take the free phone. Then sell it for more then it's upgrade price (people not eligible for upgrades will be happy to pay $100 or more for a phone if they need it, even one you got for free, because its cheaper than what VZW/ATT will charge them).

carriers want you to take the subsidy bait. because it makes you less likely to jump ship than if you were only paying the monthly usage fee. I hope that having ~4 providers on compatible LTE bands will reverse that behavior.