What does $27/month mean? Surely no one would pay $27/month instead of $199 up front.
Actually, the current AT&T Next offering isn't bad, they simply take the full price of the phone and divide by 20 or 24 months.
If you cancel service before the end of the period, you owe the balance of the price of the phone. It's essentially a 0% loan for the phone.
(BTW, the $27/month installment price means the Fire Phone's real price is ~$650)
https://www.att.com/shop/wireless/data-plans.html
So, on Next, you pay $27 per month for the phone, but $25 less for the plan, so $2 more a month or a total of $48. And you need to pay sales tax on the phone, so that's another $50 or so. But the contract plan had to pay $199 up front. So you come out about $100 ahead over the life of the contract.
$0 up front + $27/month (phone) + $0 activation (free on AT&T Next) + $65/month (service, 2GB data) * 18 months = $1656 total cost (without taxes)
$199 up front + $40 (one time activation fee, required) + $80/month (phone subsidy + identical 2GB plan) * 18 months = $1679 total cost (without taxes).
If you paid the $199 upfront, then after 18 months, your still on contract and can't upgrade for another four months and you paid $20 extra.
If you paid $0 down and $27 a month, you saved (an admittedly tiny amount) of money, and you can also upgrade six months earlier at no extra cost.
It's a shady business model that, unfortunately, works well for the businesses that use it.