Business models where products are available for free and that too with no hidden costs is a reality. As this BBC Article talks about Chris Anderson’s book “Free: The Future of a Radical Price.” The time has reached where underlying costs are so much cheaper , that it makes sense to give it free.
And some one else will pick the bill for you.
Open source is great example of this , essentially the software is free , what firms pay for is support cost. It is great example of what interlinked world of collaboration and break-down of traditional distribution channels will do with the business.
Business models like Flickr, where few premium customers are paying and most others are using services as good as free has limitless possibilities and both segments are happy with it.
It is straight-way counter-intuitive for traditional business mind-set , where you literary don’t give anything for free. It will be really interesting to see how business model is evolving .
For example you have free air-travel and cargo firms , tourism-centers and few premium customers pay for travel. One more example Metropolis is a popular high quality print magazine among foreigners and it is free , even classifieds are free and business ads support the revenue. And One of the best example I have seen is Dells 100 yen ( Approx. 40 Rs or 1 $) Netbook. Yes it is true and I am not kidding !!. Basically you get the Netbook at 100 Yen and sign for a mobile wire-less internet contract which is binding for 2 years. But still at the end it is attractive option and the unit is selling like a hot-cake in Japan.
I sincerely feel that idea has potential in all walks of life in strategy building , with a personal experience with following example. Vipassana meditation camp was not available everywhere. When S.N. Goenkaji made this 10 day residential camps 100% free including your residence and food ( It should be pointed that the motivations were never profit driven ). The growth that vipassana saw was phenomenal and exponential. Now one can find vipassana camps at almost every part of world with same rules/regulations and conducted totally free (check here ). It was pleasant surprise for me to see one in Japan. It is worth-while to note here that the move was counter-intuitive for others ( As S.N.Goenkaji mentions in his lectures ).