Are Free Motorola Phones in Our Future? A VCs Take on Why Google is Buying Motorola | Xconomy:

Free breaks down barriers to distribution, enables network effects in winner-take-all markets, and is an effective Trojan horse. If a company can give a product away for free, and has a long-term business model at scale, it can jump over existing competition.

Makes sense to me.

$600 Samsung Galaxy S II vs $800 iPhone 5 sees the iPhone win most of the time.

$0 Galaxy S III equivilent [hardware costs will be down by then] vs $700 iPhone 6… Google wins and recoups losses from search/ads/wallet/etc.