The system most common in the US is a subsidy on the purchase of the phone, which for most people ends up working in a similar fashion. This is part of why the traditional phone contract here is much more expensive than the equivalent service in other countries, as phone subsidies make up a large portion of per-subscriber costs.
As most subscribers purchase subsidized devices, this system ends up working much like the system you described, but with a key difference: the up-front cost can be easily manipulated to serve the needs of carriers and manufacturers. At AT&T, the 4S is 0$ up front, the 5C is $99, and the 5S is $199, and that is the price the customer will see and reason about more than the monthly fee. This effectively creates a market for the 5C.
Things are getting complicated now that T-Mobile has introduced their à-la carte pricing scheme, where the service sold is decoupled from the cost of the device (whether paid in installments or up front). There you see a much less stark difference in the up-front costs between iPhones, and I'm curious about the sales numbers there.
I find the use of the term "subsidy" hilarious in this context. You DO realise the phone companies just sting you through your monthly bill, and you end up paying MORE for the phone, right? That's an interest-charging loan you're getting, not a subsidy.
Except it's even worse than that -- everyone except T-Mobile charges the same service fee to customers who buy outright and customers who purchase through the carrier. The subsidy is indeed a subsidy, the costs of which are spread amongst all subscribers.
As most subscribers purchase subsidized devices, this system ends up working much like the system you described, but with a key difference: the up-front cost can be easily manipulated to serve the needs of carriers and manufacturers. At AT&T, the 4S is 0$ up front, the 5C is $99, and the 5S is $199, and that is the price the customer will see and reason about more than the monthly fee. This effectively creates a market for the 5C.
Things are getting complicated now that T-Mobile has introduced their à-la carte pricing scheme, where the service sold is decoupled from the cost of the device (whether paid in installments or up front). There you see a much less stark difference in the up-front costs between iPhones, and I'm curious about the sales numbers there.