You can't use this math to compare the cost of buying a phone outright and one on contract because no matter how you get your phone (retail or subsidized), you still need service to make it work. With that said, you actually lose $450 by not signing a contract. The trade off is that you're not locked in and can leave at any time, BUT how many people switch carriers a lot? I've been with AT&T since 2006 and even longer if you count the Cingular days, so if I were to sign a contract for 2 years, it means nothing to me other than a $450 discount on a phone.
And don't let T-Mobile fool you with their no contracts because they are actually adding that subsidized cost ($450 in this example) to your monthly bill over the next 2 years. What this means is that after the phone is paid off, your bill will actually get lower! As compared to AT&T, your bill never changes. I've paid the same amount for quite some time now and after my contract was up 3 years ago, it never moved a penny. What this tells me is that all those times I re-upped my AT&T contract, I got a truly discounted phone whereas if you're on T-Mobile you're only getting the discount price in the beginning, but will still have to pay for the full retail of the phone over 2 years. So there actually isn't any discount with T-Mobile at all!
Maybe that's why they're getting flack for it:
T-Mobile "No Contract" Plan Under Fire from Attorney General - Technorati Business