A person familiar with Microsoft mobile strategy says that Google’s Android’s is not free but indeed expensive. More expensive than the $15 that Microsoft charges for the Windows Phone 7 license.

The insider said the Android comes with all sorts of hidden costs that that drive up the per-unit expenses such that Microsoft’s $15 per unit actually seemed like a better deal.

Below are the specific hidden costs that makes Android much more expensive than it seems.

- OEMs are not using the stock Android build.  All Android OEMs are bearing costs beyond “free.”

- Lawsuits over disputed Android IP have been costly for Android OEMs.  (See Apple/HTC, as just one example.)  Microsoft indemnifies OEMs who license Windows Phone 7 against IP issues with the product.  That is, legal disputes over the IP in Windows Phone 7 directed at OEMs will be handled by Microsoft.  This goes a long way toward controlling legal costs at the OEM level.

- Android’s laissez faire hardware landscape is a fragmented mess for device drivers. (For background, just like PCs, mobile devices need drivers for their various components—screen, GPS, WiFi, Bluetooth, 3G radio, accelerometer, etc.)  Android OEMs have to put engineering resources into developing these drivers to get their devices working.  The Windows Phone 7 “chassis strategy” allows devices to be created faster, saving significant engineering cost.  It’s essentially plug and play, with device drivers authored by Microsoft.

- Windows Phone 7 has a software update architecture designed to make it easy for OEMs to plug-in their custom code, independent of the OS code.  We’ve seen the delays due to Android OEMs having to sink engineering resources into each and every Android update.  Some Android OEMs skip updates or stop updating their less popular devices.  Because of the unique update architecture, Windows Phone 7 OEMs don’t need to roll their own updates based on the stock build. Costs are reduced significantly.

- Android OEMs need to pay for licenses for many must-have features that are standard in Windows Phone 7.  For example, software to edit Office documents, audio/video codecs (see some costs here), or improved location services (for this, Moto licenses from Skyhook, just as Apple once did).  Of course, all of these license fees add up.

- Windows Phone 7 supports automated testing.  Android doesn’t. When OEMs hit the QA phase of the development lifecycle, it’s faster and less expensive to QA a Windows Phone 7 device than an Android device.

- Finally, Windows Phone 7 comes with great user experiences in the Metro UI, Zune, Xbox LIVE, Exchange, and Visual Studio for app development.  Creating these experiences for Android is costly.  They’re not baked into the stock build of Android.