Except you still get the same fee even if you don't take a phone with the contract (e.g. a renewed contract, where the phone is already paid for and available for 'unlocking', or one where you bought the phone already unlocked - or transferred it from another compatible carrier after it was unlocked - and got a contract).

The primary purpose of the fee is to discourage people from signing up a contract and then canceling the contract in short notice. Usually the fees go away or are reduced after a significant portion of the contract term is fulfilled.

Of course, you can always let the contract expire and not renew and then cancel and completely avoid the fee too.

Also - my phone was $80 without contract. The fee was $150. After rebates, etc. I paid $30 for the phone. So, only $50 of that $150 could even possibly be considered covering the phone. Now if you consider that some phones are really expensive (e.g. $500, like the iPhone) and are discounted to the $200-$300 range and they still only have a $150 fee.

It's not the fee that keeps the phone. It's the phone locking. When you get a phone with contract, they put a special code into the phone that locks it for use in their network only. After the duration of your contract (or a certain portion thereof, based on your contract), you can then request that they unlock the phone, which then lets you use the phone on other carriers networks (e.g. taking a phone from AT&T/Cingular and using it under a contract with T-mobile).

FYI - they won't give you the unlock code unless you fulfill the terms of the contract and the time required by the contract for it to be unlocked. (Doesn't mean you can't find the codes on-line, though. But I wouldn't recommend it.)

This is also why I'm purchasing my next phone at full price - fully unlocked, directly from the manufacturer. I can then use it under whatever contract I like.

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