I have read on many threads talking about upgrading from the 4 to the 4S because it's basically free, i.e. the upgrade cost is covered by selling your iPhone 4. Here are a few examples: The tariff you're paying is higher than standard and subsidizing your handset. Now, I'll have to add a disclaimer at this point as I don't know how SIM only works in the US, but I can't imagine it's not similar to the UK. Let's assume I'm going to get the 32GB 4S on O2 (most networks are fairly similar), with a mid range tariff: 300 mins - Unlimited Texts - 500MB data - £249.99 for the phone - £31 a month tariff (18 months). Let's say I sell my iPhone 4 to cover the cost of the upgrade, therefore cost of ownership over 18 months: £558 O2 have a SIM only deal: 300 mins - Unlimited Texts - 500MB data - £16.50 So if you keep your iPhone 4, cost of ownership is: £297 Therefore, to get your "free" upgrade to an iPhone has cost you: £261 Now, if we add £261 to the cost of the phone on that tariff, it's almost exactly the same as buying the phone off contract. The operators will always recoup the cost of the handset with an inflated tariff. I know most people already know this, but just wanted to point it out to the people who constantly use this as a justification for upgrading when it's a completely flawed argument. EDIT: Looks like the US does work in a completely different way and I was wrong. The lack of competition in the industry is a disgrace. You should all be complaining about this.