SEMIACCURATE'S MOLES TOLD us the dirty little secret of Windows Phone 7, no one pays for it. Yes, to compete with Google's price for Android, free, MS is charging the same price, just not directly.
We were sitting in a bar with a high up representative from a major phone maker, lets say they are one of the top few in the industry. When the topic of WP7 came up, we asked the usual question, "Wince is about as beloved in the industry as an unexplained genital rash. Given the bloated hardware it needs just to perform slower than a Linux based phone, you blow out the BoM cost compared to an Android phone. MS wants to charge money for an OS on top of that? How do they think they will compete? The phones will cost way too much."
The reply was one we were not expecting, that Microsoft knows this, and is giving WP7 away. Officially, they pay for a license, but Microsoft has guaranteed that they will get all that money, plus more, back through other channels, advertising, and other less direct methods. Windows Phone 7 is free, or to use the term tossed around about Android's cost, 'less than free'.
Yes, Microsoft is competing with free and open software on price, not the smartest thing to do if you are a for profit company. According to my source, it isn't a one time thing either, not just a temporary launch price to get their foot in the door. He indicated that if MS tries to back off on their pricing model, they will find out exactly how much phone makers think of Windows Phone 7. He strongly hinted that tepid sales more than adequately reflect the love felt by OEMs for the OS.