I think you understand how it works, but phrased it wrong.

T-mobile is the only one who doesn't markup its prices for contracts used with unsubsidized phones. Where, "subsidized", means subsidized by the customer. The other carriers charge you the same extra phone subsidy fee (in effect), regardless of whether you bought the phone at full or "discounted" price, so there is no incentive to buy a phone at full price.

I agree that this is a consumer hostile model. T-mobile seems to have the best offer, where they let you make multiple payments on a full price phone (at no markup I believe).