Nothing actually changed...

Also, the US is a rare country that primarily uses CDMA (and, till quite recently, GSM was a negligible part of the market). Countries that grew up on GSM got used to the idea that you can take your SIM card and put it in another phone and it will "just work". US consumers never had that expectation: switching phones with CDMA wasn't so easy, and the GSM providers don't see any reason to make it easy, either...

It is paradoxical, almost, that phones are subsidised in the US (a rich market where many people can afford a $400 phone) and not in India (where the market for such phones is relatively tiny). But the reason, of course, is that in India the people who can't afford a $400 phone can't afford a $40 monthly bill either. Many prepaid users probably pay $1 a month, or less (it helps that incoming calls are always free, but even outgoing calls now cost a couple of US cents a minute) and get a low-end phone for about $40 (new) or much less (after-market). Those who can afford the high-end phones are happy to pay. Meanwhile, in the US, if you buy your phone separately it really doesn't help you much with the monthly bill. (Someone posted above that T-Mobile gives you a discount of $10, which works out to $240 in two years: that's not a huge incentive to buy a $400 phone outright.)