I think that their argument is that if they sell a phone at a subsidized price, then they have a right to enforce the contract in order to recoup their "loss" on the sale price of the phone. This is being likened to a finance company having a lein on your car, that you cannot sell it and transfer ownership to someone else until they are paid off in full and release the title.
Which onthe surface sounds plausible, until one remembers that if you break the contract early, you are subject to the FTA, which they say is there for the same reason, to recoup the subsidy they gave you on the handset.
Legally, I would hope that they can only claim one or the other, not both. So either you pay the ETF and take your phone to another carrier, or, you wait out the contract and then take it. But not have you pay the ETF and then claim you have to finish the contract and then still try to prevent you.
My point is that their argument holds no water when you consider that that argument is what the ETF is already in place for.