My wife's contract has been up for a while and her plan is still $70 / month. AT&T has always claimed that part of the 70 was to subsidize her phone yet her contract is up and they refuse to lower the bill so, I ignore the subsidy crap because her plan will always be $70 with or without a contract.
What that means is your wife is still paying the subsidy without having the benefit of a new phone. Essentially, it's throwing away money.
If you don't believe that the subsidies were built into the contracts, you can read the relevant SEC filing from AT&T.