AT&T used to allow iPhone users an upgrade annually for the new iPhone despite being on a two-year contract. I'm not sure if they have for this round, but every other year, they simply changed upgrade eligibility for iPhone users right before the iPhone came out.
The problem is that this is very expensive. An iPhone costs $650 and you get it for $200. That means that the carrier is eating $450. Even if you argue that a carrier is getting a discount and it's only costing them $300-350, they have to earn that back. $300-350 over 12 months is $25-29.17 per month that they have to earn back, plus interest. So, you have a $30 data plan, and only $0.83-$5 of that is going to actually implementing, maintaining, etc. the network. If they're subsidizing the device by $400, giving you an upgrade ever 12 months would mean taking a loss of $40 not including the cost of creating and maintaining the network.
So, it's quite detrimental to a company's bottom line to offer that to the point that it isn't wonderfully feasible. Sure, you can say that it gets you the voice plans of those people who switch and maybe that can go to the subsidy as well and whatnot, but the margins are thin. I'm quite literally paying $40/mo for my iPhone plan as an add-on to a family plan (plus 1/5th of $20 for texting ($4) and 1/5th of $70 for voice ($14)). So, I'm paying a total of $58 and getting a $450 discount on the device. $450 over 12 months is $37.50 plus interest and so I would only be paying $20.50 per month for my actual usage. Even if I bring my own phone, there isn't a carrier that would give me a price near that low.
Frankly, I think it would be better for uses to pay the $649 up-front and have cheaper plans (and this does happen in many countries and can happen here if you want to buy the iPhone 5 for T-Mobile). However, even there I wouldn't be getting such a value. T-Mobile offers 500 minutes plus texting plus 2GB of data for $50/mo. For $8 more on a family plan, I'm getting $450 off my device which even if I can only upgrade every 24 months is an $18.75/mo value.
It would definitely be a huge differentiator. AT&T did this for many years to keep Apple fans happy and to prevent their yelling from overwhelming the press around the new device. However, it's really expensive. Even if you gained more customers, it likely wouldn't be worth it.
If you ask nicely, AT&T will upgrade every year -- they have for me. They'll tell you about the "early upgrade fee" ($250), so just ask them what your current early termination fee is -- it'll be less (that's why they raised it last year).
So you pay the ETF and switch to Verizon. If you got the 4S last year, you're looking at $215 right now for an ETF vs $250 for the "early upgrade fee". Chances are, they want to retain you as a customer, so they'll waive the upgrade fee.
I certainly don't feel bad for AT&T, my average monthly bill is $130, so I'm paying them ~$1600 in monthlies per year plus the annual $200 (& change!) upgrade fee. So I don't think it's unreasonable to get a new $650 iPhone each year for the $2K I'm paying (which as you say probably only costs them $350).
I just wish they'd formalize this into a "Apple fanboi" plan so I don't have to threaten to cancel, argue with managers etc to get that shiny new phone on release day!
Full disclosure: I do sell the previous phone via eBay, so I guess I'm at least making the $200 upgrade fee back.
The problem is that this is very expensive. An iPhone costs $650 and you get it for $200. That means that the carrier is eating $450. Even if you argue that a carrier is getting a discount and it's only costing them $300-350, they have to earn that back. $300-350 over 12 months is $25-29.17 per month that they have to earn back, plus interest. So, you have a $30 data plan, and only $0.83-$5 of that is going to actually implementing, maintaining, etc. the network. If they're subsidizing the device by $400, giving you an upgrade ever 12 months would mean taking a loss of $40 not including the cost of creating and maintaining the network.
So, it's quite detrimental to a company's bottom line to offer that to the point that it isn't wonderfully feasible. Sure, you can say that it gets you the voice plans of those people who switch and maybe that can go to the subsidy as well and whatnot, but the margins are thin. I'm quite literally paying $40/mo for my iPhone plan as an add-on to a family plan (plus 1/5th of $20 for texting ($4) and 1/5th of $70 for voice ($14)). So, I'm paying a total of $58 and getting a $450 discount on the device. $450 over 12 months is $37.50 plus interest and so I would only be paying $20.50 per month for my actual usage. Even if I bring my own phone, there isn't a carrier that would give me a price near that low.
Frankly, I think it would be better for uses to pay the $649 up-front and have cheaper plans (and this does happen in many countries and can happen here if you want to buy the iPhone 5 for T-Mobile). However, even there I wouldn't be getting such a value. T-Mobile offers 500 minutes plus texting plus 2GB of data for $50/mo. For $8 more on a family plan, I'm getting $450 off my device which even if I can only upgrade every 24 months is an $18.75/mo value.
It would definitely be a huge differentiator. AT&T did this for many years to keep Apple fans happy and to prevent their yelling from overwhelming the press around the new device. However, it's really expensive. Even if you gained more customers, it likely wouldn't be worth it.