Sure, but that's not how 99% of people get their phones, especially here in the US. From the perspective of a typical US phone buyer, who purchases a phone along with a 2-year contract, the prices are about the same.

How else was Apple going to maintain their 55%+ profit margins on the things?

It sure does make you wonder why Verizon is charging as much as AT&T for their Android plans when the device is almost half the cost. I guess the answer is because they can, because they have a better network. I also wonder if Android handset vendors will try to get a cheaper plan out of Verizon when the Verizon iPhone supposedly lands this summer/fall...