Customers seem to really like free as a price point. I suspect they will love “less than free."
Bill Gurley points out that Google's recent moves with Android and their Mapping API's have ushered in a new era of 'less than free.' Windows Mobile, Blackberry and iPhone platforms charge the mobile operators, whereas Google actually subsidizes operators that choose Android through ad rev shares.
Thus far, Google has been able to use its gigantic firehose of profits from ads to make it very difficult for people in other industries to survive. The consumer wins. But can you imagine how deflationary these tactics are for tech as a whole?
Every dollar Google gets its hands on... may eventually extinguish someone else's dollar of profit in an otherwise unrelated field. Crazy!