As much as this may shock the desktop IT world, phone OS platforms aren't that expensive and don't add that much to the cost of mobile phones. For example, the average Symbian license only costs around $2.50 a phone. Taking away $2.50 from the cost of building a phone isn't going to make the end price significantly cheaper. In fact it might not even affect it at all.
2. Launching handsets on a new, untested OS is expensive.
Many handset makers have their own proprietary OSes running on their devices, especially for feature phones like clamshells or candy bar devices. It's pretty inexpensive to launch new devices on these established platforms. But ramping up on a new software system costs money -- Q&A, hardware re-adjustments, etc. Early Android phones may be even more expensive than their rivals because of these additional research and ramp up costs.
3. All those cool features on the Android videos will require phones with expensive hardware.
Even a relatively mid-tier feature phone with enough horse power to run Google Maps, YouTube, and Gmail will cost at least $250 unlocked. Any relatively decent-grade smartphone would cost $150 or more with a carrier contract or more than $350 unlocked. Even with HTC and Motorola on Google's side, these phones will not be cheap. And it's likely that the carriers will not subsidize them to the degree that they do phones like the Razr, which, if I am not mistaken, is built on a proprietary platform, not on a third-party OS.
4. If Android phones are unlocked, they'll be even more expensive.
Android is all about being open and the most open mobile phones are unlocked ones. Assuming Google succeeds in getting its handset partners to offer fully unlocked Android handsets, you can bet these phones will be pricey. Everyone thought the iPhone was expensive -- many complain that at its new price of $399 that it's still too expensive. Many unlocked phones, though, cost way more than even the first wave of iPhones. The costs I mention above are baseline. If these Android phones offer any kinds of rich displays or other features, you can bet they'll cost a pretty penny. Remember, an unlocked Nokia N95 can set you back as much as $750. That's the same price as a entry-grade laptop. While I doubt any phones running Android will cost this much, I doubt they'll sell for $49.95 either.
What do you think? Can Google use Android to both open up the cellular industry and lower the cost of all cell phones? Or will Android phones cost as much as other mobile phones?