check it out with O2.
I have 5 business contracts, 4 of them started out as medium business frequent user. What you say is true, except when it's an iphone you upgrade to (might be blackberry too).
If not the numbers just don't work out.
you'd be paying less than £600 over the course of the year, which is less than the phone and would get the phone calls for free.
The people who set O2's pricing aren't stupid! I'd ring them and explain exactly what you think is the situation and get them to confirm.
When I sorted out my contracts - blinding deal btw - I rang on about 20 different occasions in order to get someone who actually understood what I was trying to achieve. I got different information everytime I rang up until I managed to get someone to do all the things wanted on each tariff.
I now pay £29+ vat /month for 800 mins, infinite texts, infinite calls to all O2 and infinite calls to all landlines, and I get to upgrade every 12 months for around £100 for the small size of the latest iphone. Trade in my phone like you do, and I get roughly a £200 subsidiy towards my tariff and always have the latest phone.
Only downside is that should I ever want to leave, I am in contract for 12 more months.