Originally Posted by tompe
But $0 phones are never no cost since you have to have a plan were you pay for much more voice calls than you use. And that money is of course used to pay for the phone.
Here in the Netherlands, it's pretty simple: If a SIM-only plan is X Euros a month, the same plan (as far as data limit and minutes are concerned) with a 'free' phone is X + Y Euros a month, where Y * <nr of months of contract> = '<roughly the price of that 'free' phone>'
Effectively you pay for that phone anyway, either in one go (if you buy it yourself) or in monthly installments (if you get it 'free' with your plan). The providers aren't giving them to you, and probably aren't losing money on them.