No commitment means no subsidy
Since the nature of prepaid cellular service revolves around no contracts, it makes sense that companies do no subsidize the cell phones.. Much of the time, this means you're paying full retail price for a phone, which can now get up into the $300 and $400 range for the top models.
The companies' logic is that they don't want to give out a subsidy only to have you break away from their service in three months. Since there's no way to penalize a prepaid user -- since they never agreed to a contract -- there's no way to get back a monthly premium for an expensve cell phone.
The best offer in this regard comes from companies who sell discounted new cell phones or refurbished models. The cost of the unlimited talk, text and data from the postpaid plans is quite significant.
Take a close look at the numbers. Lightyear offers unlimited talk, text and data for $59.99 per month which equals $1119.88 for one year. Even with the cost of their most expensive Smartphone which is $414.99 the savings is still $245.01 for a year compared to ATT and $305.01 compared to Verizon. The difference with Sprint is not as significant $14.93 and Verizon's data service is limited to 2G.
But this is with the assumption that Lightyear's most expensive phone is purchased. Their phones range in price between $39.99 -$414.99. The savings can be extreemely significant.
There is more however...free service?