I don't even have a problem with subsidies for phones. I think it's perfectly reasonable for AT&T to give a discount on the iPhone as long as you sign up for a 3 year contract.

What I find absurd is that they have any interest in what phone you're using once you have the service, or what you do with the phone once you've gotten it. I don't see why it should be any different than if they were running a promotion giving away toasters if you signed up for a 3 year contract.