The base entry-level 16GB model iPhone 5 costs the consumer $650 in the US. Many carriers will pay for $450 of that price tag leaving the customer only needing to pony up $199 or so, so long as you sign up for a 2-year contract. How can they afford that?
Mashable has posted an infographic by Avalaunch Media that details the break down of all the iPhone 5 related expenses over those 2 years. The majority will go to the wireless provider. In fact, thanks to the monthly payment plans, these 2-year contracts end up costing much more than the initial purchase of the iPhone 5.