ah! This is easy but not obvious at first. I will give details for the benefit of all who may read in the future.
Buy your cell phone from another source. If you buy from them, they give you this "great discount" but all you have to do is sign up for a 2 year contract. They have a different price for the phone with "no contract" and on verizon at least this no-contract price is usually about $175 more than the discounted price. When you look at the fine print, the fee for dropping your contract early is $175. (I'm not sure if I"m getting the numbers right, but it's about like that).
I went on ebay, did my research on the phone, and waited for the it to come up for a cheap price. I paid $280 + shipping which is actually cheaper than my "with 2 year contract" price would have been on the verizon website ($350, after rebate). Granted the phone was used, but it's only 6 months old and in great shape (and no contract!). Then I waited till my phone came, went on the website and went through the connection process (free to activate the phone online), which took about 5 minutes, really simple. I was already with verizon, and I just switched from my old phone (which I am now keeping as "insurance" in case I do some damage to this one, or my husband does to his, we can always use the old phone) to the new one.
My guess is that if you are starting with a new company, you can do the same thing, but you'd probably have to call them and talk to a human. I'm not quite sure how it would work, maybe you could do it all online.
I'm sure you could buy the phone elsewhere besides ebay, just as long as you read the fine print and make sure it says "no contract" or something similar. I see phones all the time on amazon with the great price and it always says "with 2 year contract." So I'm not sure where to get one besides ebay.
So to be short (haha), the only way I know how to do it is buy a used one.