IMO Pushing contract-less smartphones into the market was a good move, but the market didn't seem to go for it in the US.
If Google really wanted to "capture" the market, they should come out with a no-contract sub $200 unlocked smartphone, and let the market decide if that is a better price point. $529 is too expensive for US consumers, when "free" phones are available.
To me, one of the problems with unsubsidized phones is that the lower price from the carrier is not obvious. Or at least, I'd always be wondering if I might be paying the same price as someone with a subsidized phone.
That being said, I did buy an iPhone before it was subsidized.
The real problem is a non-subsidized phone costs you more on most carriers than the subsidized version. Even if bringing your own phone gets you out of having to have a contract, you don't save anything in the process. You pay the same monthly fee as someone that got a "free" phone. So why give that up? It's a tough sell.
The nice thing about non-subsidized phone is that you can use it with any SIM, including prepaid options.
I don't know how the situation is in the US, but in Europe it's quite common and in big parts of the world it's your only option.
For example: When travelling in Thailand I can get a SIM at every 7 / 11 for about 5 bucks with 100 baht credit. This is more then I usually need for the few weeks there and it's extremely convenient when you want to call around the country without being hit by absurd roaming fees.
Having lock-downs of any kind on a phone to me is a killer criteria for not buying it. Subsidized or not.
T-Mobile really seems to have turned their act around. I was with them for a long time but went to AT&T for the 3Gs (at the time being able to tether at a decent speed was worth it).
Now, I don't know. I'm on Verizon and Verizon's coverage was surprisingly good in places I've never had GSM coverage. I'm not sure if I could go back. I wish I could, though - I'd love to give them my support for things like that.
If Google really wanted to "capture" the market, they should come out with a no-contract sub $200 unlocked smartphone, and let the market decide if that is a better price point. $529 is too expensive for US consumers, when "free" phones are available.