Ad revenue, and increased iTunes sales will cover 90-110% of its operating costs, making it a slight loss-leader or slightly profitable, depending on which way the wind blows, but there will be no incremental cost to the hardware. Other way around, for Apple, this is just meant to make the hardware and Apple's overall ecosystem more appealing and to drive hardware sales.Are you kidding? The customer pays the whole thing up front. It is buried in the cost of the iPhone. You don't get this for free.