If consumers paid out of pocket for their phones then they would be more picky about upgrading and plan prices. It would also make upselling shitty plan features harder so the carriers would loose a lot of money.
I guess the carriers still make money because once habituated, especially if they've never done the port-number-to-new-carrier thing, people stay in the high priced plan longer than necessary. Like the three years until they've truly paid the above-market price for the phone, and are now eligible for another "free" phone which they may not even take advantage of.
For what it's worth, carrier locking phones has been illegal here for some years (and any phone from the locked era had to be unlocked for free for the asking after the law was changed) and it hasn't changed anything in terms of these rent-to-buy type carrier plans. So I don't know what the fuss is about. A contract is a contract.
I don't see why its different than a car really. While some dealerships are adding GPS trackers nowadays, there is nothing stopping you from buying a car on credit and driving it to Mexico and hiding it in a locked garage. It's going to be very difficult to buy another car if you do that though, and that's enough of a deterrence for most people as they have to continue living their lives and eventually buy a new car.
It's possible there are some obscure features that may not work properly but for general usage as far as phone calls, texting, data usage, I've never heard of anyone having any issues with their Canadian phone internationally, besides maybe the cost of roaming.If you have a source from recent times that says this, I'd like to see it.
As far as minimal competition goes, there is not an infinite amount of cellphone carriers in the US either that will give you a phone on credit, especially if you have bad credit. I'm sure there are existing ways you can scam phones out of carriers too if you are fine with being banned from the carrier and/or torching your credit.