If you have enough competition, some carrier will fill that niche and offer a noticeably cheaper plan for non-subsidised phones. And when that happens, a full-price (non-subsidised) phone + those plans normally turns out cheaper than a subsidised phone + higher rates.You're going to pay the same rate for your service regardless of subsidy status of your iPhone. Why pay $650 when you can pay $200?
For example, regulation making life easier for mobile virtual network operators (MVNOs) is one way to enhance competition.