I have seen some phones in Chinese retail sites for $90. For amazon it's cheaper say $3 per month over 24 months.

Now consider the revenues for content, apps, increased e-commerce sales, ads and better profiling and maybe some profit from the phone service - amazon have plenty of ways to earning this $3 per month.

The only question - what about people getting the phone and not using it at all?

1 - http://www.rawstory.com/rs/2011/11/18/amazon-sells-kindle-fi...

If you sell something at a loss, the consumer still had to put up some money and has a clear interest in using the product. That makes taking the loss upfront less of a risk since the consumer is more likely to use the product and eventually make a profit for you.

If you give it away for free, people will accept the product, whether they are interested in using it or not. That means a smaller percentage of people who take the product will actually be likely to use it. That makes recouping your loss much harder.

I don't imagine that costing too much, so it might fall within any acceptable loss they have built in to their products. Then again, it would have less capability to generate revenue for them, unless it changed data that passed through it (replacing adds, etc), which would be pretty horrendous.

1. You've very possibly decided that e-readers are a win.

2. Amazon really really wants to convert you to their ecosystem before you invest "too much" into B&N's.

It's certainly something I'll be keeping an eye on.

EDIT: Also, they have to realise that it'll be rooted and have Google apps installed on it within days, thus loosing their "guaranteed" revenue stream...

The South Korean government banned contracts for being anti-competitive, which gave a big boost to Samsung and LG. Now Chinese firms like Lenovo, Huawei and ZTE are benefiting as well.

This is why Apple has no real choice about doing a cheap iPhone. Contracts mean it can dominate the US market while making huge margins, but the rest of the world is going Android.

"It is also shows that Apple’s worst nightmare may be coming true: prices could fall not just for cheap phones in developing markets but higher-end ones too."

But there is no discussion of wether this really is a high end phone. Looking at existing Kindle tablet, I'm going to guess that it will be mid-range or upper low end, depending on how you define those terms. Free low end could force prices down on the high end, but thats not really a slam dunk case.

But I'm not quite sure that Apple would be the worse off compared to others. I does not really matter whether or not a brand has current plan for the low end: if people expectation are set to high-end phone == free, I'm not sure why they would want an low end phone unless what, you pay them ? What really matter is what brand has an alternative way of funding those phones. IMO that means killing "open" Android, anything open really.

Apple can still rely on the App Store and its walled-garden. MS tiny markeshare will probably make them give up under the risk of bleeding to death. Samsung has enough marketshare to build its own walled garden. Google would have some thinking to do, I'm sure other brand will start to question how valuable their client really are for Goolge. As for the rest of the Android player, RIM, ... well good luck.

So, at the end of two years, you'll be paying the same amount for your phone bill and have a subsidized device.

For example, since I'm sharing a plan with my family, the ATT contract comes out to around 20% cheaper than a similar contractless byo device Virgin Mobile service for iPhones, upgrading only after the contract is up.

Trust me, you're being ripped off.

That's just because of how ubiquitous the subsidized phone model already is.

I bought the phone outright. Most telcos would make me pay $80 per month over a couple of years to get the subsidized phone. A much more expensive deal for something I don't want.

Most of the US phone carriers have the same attitude towards phones. Your cellular contract comes with a phone. If you want to bring your own phone, that's fine, but the price is going to be the same whether you use their phone or your own.

Thankfully, some of the smaller carriers are moving away from this attitude, but bringing your own phone can still be a major pain. After all, the only thing better for a salesman's commission than selling you an expensive contract in exchange for a phone is selling you that same contract and not giving you a phone.

Consumer mobile telecom in the US is fundamentally broken.

I wasn't thinking about the latest iPhone. I was talking about how some companies will chip in a "old" phone to get you to sign with them.

I have not been attracted to Amazon's Android-based devices because I would rather have the more-general suite of services provided by Google. But I can see people making the opposite choice.