But the good thing about the rumors still being around is that I came up with another argument about why it won't happen:
Michael Tamblyn of Kobo Books gave a presentation at the O'Reilly TOC conference a few weeks back. I just came across the slides for his presentation a few days ago and it turns out Kobo have been doing some serious analysis on their customer data.
They've broken their customers down into 4 broad groups, and there's one in particular that is relevant to this discussion. (You can find the slides at the end of the post.)
Freegans are a type of customer that don't buy ebooks - ever. They read the ebooks on the Kobo website or use one of the free apps, and they only download free ebooks. Most will have 9 or more free ebooks in their library.
Before anyone at Kobo gets upset, let me add that I've thinned the data down a lot. But that does not change my point. Kobo have solid data that shows some customers won't buy ebooks.
Even if you give them a free ereader, they still won't give you any money. This customer will only go for stuff that's free. If the Kindle is free, I believe virtually all freegans will get one. Then Amazon will be out the nominal $139 with no hope of recovering the cost.
I know everyone is in love with the idea of a free Kindle, but I really don't see how it's going to happen.