Is Microsoft's $15 Windows Phone 7 fee cheaper for smartphone makers than free Android?

Microsoft is claiming that it's less expensive for smartphone makers to put Windows Phone 7 on their phones than it is for them to put Android on it --- even though Android is free and Windows Phone 7 costs them $15. Do you buy it?

Microsoft's argument is laid out by Henry Blodget in the Business Insider blog. Blodget interviewed someone at Microsoft who gave him the information, but declined to be identified. Blodget isn't necessarily buying the argument, but instead laying out what the Microsoft person told him.

The core of Microsoft's argument is that even though Android may be free to smartphone makers, they have to spend a lot of money deploying it and maintaining it on their phones, and those costs are much less with Windows Phone 7.

The argument starts off with the fear factor --- that smartphone makers may be subject to lawsuits over the use of Android. Oracle has sued Google over Android, claiming that it infringes on Oracle patents that have to do with Java. Microsoft wants smartphone makers to worry that they'll be targeted as well. Microsoft also says that its Windows Phone 7 contract indemnifies smartphone makers against these kinds of suits, and that Microsoft will bear the legal costs.

Microsoft also claims that with Android, smartphone makers have to spend unnecessary time writing drivers for their devices, such as GPS, WiFi, screen, 3G radio, and so on, while with Windows Phone 7, those drivers can be created more quickly and easily.

In addition, Microsoft claims, updating Android versions on existing phones is a serious problem, requiring phone makers to spend a substantial amount of engineering time, while Windows Phone 7 features a much simpler updating architecture.

Microsoft makes several other arguments as well, such as that that phone makers need to pay license fees for features that are included in Windows Phone 7, such as software to edit Office documents. And the company claims that Windows Phone 7 automated testing capabilities reduce costs compared to Android testing.

Where's the truth in all this? It's entirely possible that phone makers have to bear some of these types of higher costs if they choose Android versus Windows 7. But I don't believe that the cost exceeds the $15 per phone fee that Microsoft charges for Windows Phone 7, especially given the economies of scale phone makers achieve when shipping high volumes of Android devices.

It's certainly true, though, that Android phone makers have a problem with upgrading Android --- witness the ongoing Froyo update problems as evidence for that. My Droid X, for example, still hasn't gotten a Froyo update.

But overriding all the issues of cost is a much larger point: Android devices sell like hotcakes, and Windows Phone devices don't sell at all. So if Android costs phone makers more, they'd still flock to it, because that's where the money is. So cost, at this point, is irrelevant.

If Windows Phone 7 phones ever sells like Android phones, then perhaps Microsoft's points are worth arguing. But until that happens, the debate is moot --- volume wins.