Your Free Phone Cost $240

Your free phone cost you at least $240. T-Mobile wants you to know that. But is anybody listening?

Cell-phone companies have dropped phones into American hands largely by lying about prices. It's a devil's bargain, but one that most people are happy to make. In exchange for a free toy, you sign your life away to your cell-phone carrier for two years. You usually grotesquely overpay for your phone, too.

The toys aren't free. Their prices are invisibly baked into your phone contract and then squeezed out of you if you try to get out of the contract early. The difference between the real and fake price of a phone is called the subsidy. Do you know why Verizon just raised its early termination fee to $350? That's almost exactly the subsidy on the .

And let's not get started on the creeping evil of carriers' "mail-in" rebates, which often require jumping through annoying hoops and then result in oddball debit cards, not cash. They're another way carriers hide prices to make things appear "free" when they aren't.

Subsidized phones help more people get cool phones, but they're evil in the way no-money-down mortgages are evil. Most people don't think about what they're really paying, or what they're really overpaying. Just like with mortgages, mobile carriers charge more than a phone is really worth and drag it out over two years. But research generally shows that American consumers react to up-front prices, no matter how deeply they'll be in the red down the road.

T-Mobile, My Hero
T-Mobile became my hero a few weeks ago, when it introduced the first plans that let you strip out the phone subsidy. Up until now, you could never see a subsidized and unsubsidized price on the same carrier. But guess what, it's almost always cheaper to pay for your phone up front.

Let's say you want a , a nice little voice phone. The subsidized plan charges $10 more than the unsubsidized plan over 24 months, in exchange for getting a $140 phone for free. Yes, that's right. You just paid $240 to get a $140 phone for free.

The same math works for many smartphones. Want an with unlimited data and texting? You'll be paying an extra $20 per month in exchange for getting a $540 phone for $350. So that means you're paying $830 for your $540 phone.

Aside from gouging people, subsidies distort the market in other ways. Because people are afraid to break their contracts, they can't to jump ship to other carriers. This is good news for the carriers, who hate "churn," but it's bad news for competition.

Fistfuls of Dollars
Americans can't think ahead. Forget subsidies; they don't even react to cheaper monthly fees. All they care about is that lying device price tag.

If anybody cared about long-term prices, Sprint and T-Mobile would both be doing much better than they are right now. The and the on Sprint both look like they cost around $200. But over two years, with an unlimited talk plan, the iPhone costs $1,200 more. Yeah, sure, the iPhone is great, but is it $1,200 better than a Sprint phone? Really? Do you want an iPhone, or an HTC Hero and a 50-inch plasma TV?

If people actually wanted to save fistfuls of money, hundreds of thousands of people would be jumping over to T-Mobile's "" plans right now. In response, the other carriers would introduce their own subsidy-free plans, and then we'd all have a lot more money to spend on smartphone fart apps.

This will never happen. T-Mobile's brilliant plans will fail, because the only price tag anyone reacts to is the misleading "free!" next to a phone.

There is a tiny glimmer of hope. Last year New York City started requiring fast food restaurants to post calorie counts. The 15 percent of people who decided to use the information ordered less calorie-laden food. So better information helps about 15 percent of people. Could that be enough? Keep an eye on the success of those "Even More Plus" plans.

Just Tell the Truth, Carriers
A truth-in-billing law would definitely help. I'm not the only person who thinks so; consumer advocates have been begging the FCC for this kind of regulation for years.

Let's see, online, when we're buying our phones, how much of our monthly fee goes to handset subsidies. While we're at it, let's also see the correct monthly fees on carrier Websites, including all of those mysterious "taxes" that only appear after you actually complete the purchase.

And heck, since I'm asking for the world, let's make the carriers post all of their plans on one page, so we can actually compare them. There's no reason you should need a PhD in Cell Phoniness to know whether the data plan for a Droid costs $30 or $45.

This isn't "interfering with the market." This isn't price control. This isn't forbidding the carriers from charging anything they want. It's just asking them to explain themselves.

I'm older and more cynical than I used to be; I know that Americans will ignore useful information and take the "free phone," which costs them more in the end. But if they know what they're getting, at least they're making the choice with their eyes open.