It's because carriers outside the US and Canada mostly don't do upgrades. Think of how much your internet bill would be if every two years your ISP sold you a new computer for about a third of the actual cost.
I know that was the case at one point, but is that still accurate? Perhaps, hopefully, some of our European posters can help us out here. In other words, is the trend in Europe to pay $700 for an iPhone and then pay $50/month or so for a good service plan? Only T-Mobile seems to come close to some of the best offerings in other countries.
This probably is just the case in Austria, which evidentely has one of the cheapest overall market-structure in Europe, but for a 50€-plan you get your iPhone for free and twenty other extras you will never need. Prizes usually range from 20-30€, rarely more for a single-person plan; and you mostly get new phones on a two-year basis; such is included with nearly every but the cheapest contracts...