My point is that Google wants Nexus to become a name that the general public recognizes.
People already have the option to buy $500/$600/$700 phones off-contract, and they just plain aren't doing it. The vast majority of phones sold in the US are between $0 and $199 on-contract, whether that makes sense to the hobbyist community or not. Americans don't buy prepaid sim cards, and they don't know anything about MVNOs.
If the Nexus is just another really expensive phone that carriers aren't pushing, and that consumers have to take multiple extra steps to activate and use, it's going to remain a niche product. What did the Samsung/Apple lawsuit reveal, that they sold a half million Gnex's, something like that? That barely moves the needle. Market it as an affordable alternative that pays off in the long run, and you'll have a successful product launch.