Facebook smartphone with HTC launching soon

pedantic correction: One billion Facebook accounts are accessed every month. No third party established that each account corresponds to a unique person.

Facebook has been known to partner with Microsoft. It's possible that the phone will be full of Bing.

On the other hand, Microsoft is trying to promote their own phone OS, and this phone is clearly DOA if it doesn't run Android apps, but I can't see Microsoft liking the idea of promoting the Android ecosystem.

It's kind of funny actually. You could see how it could make sense for Microsoft and Facebook to work together and create some Facebook Phone running WP8, except they each probably think the other is going to fail and don't want to board a sinking ship.

Considering the vast amount of complaints towards Facebook regarding privacy concerns, do you really think it would be in the best interest of those users to allow third parties access to all of their data to "verify" that?

get the average person to care?

currently anyone in the world on pretty much ANY device can access, register an account, and connect fast and easy to their nearby friends on Facebook. The FB philosophy is to "make the world more open and connected" , not "help connect relatively wealthy, tech oriented people." Diaspora has a number of significant hurdles it needs to tackle to just be in the conversation:

1) Ease of access from any device -- can some rando in Egypt open up a 'dumb' phone, sign into his account, and enter the political discourse relatively easily? Twitter is getting there on this account, and it's why Twitter is in the conversation.

2) Scale -- currently everyone and their mom (and dad, grandparents, cousins, long-distant alumni friends, etc.) is on Facebook. For a social network to "replace Facebook" in your words, their needs to be a solid value proposition over Facebook that causes huge droves of people to move away or switch. Currently there's little -- maybe privacy controls could be easier to use, but Zuck himself said that users control their data already: "Our philosophy is that people own their information and control who they share it with." Other than that -- why would the average person put in the "activation energy" over inertia to switch, other than "it's shiny and cool?"

In all Diaspora is an interesting project, but it has little differentiating value prop

A big part of buying behavior for phones is the carrier retail outlets pushing the phones onto potential buyers.

Facebook, like Amazon, is a company deriving revenue from its ads and content (virtual currency, etc). They could afford to sell the phones to carriers "at cost", at which point the carriers will have a HUGE incentive to sell the phones. Now of course, if they sell at 0 margin to the carriers, HTC won't be happy. But HTC is not doing well at all in terms of phone sales, and perhaps they'd be willing to sell the phone to carriers at very low margins (kind of like how LG, lagging in sales and design inspiration, partnered up with Google and sold a device, the Nexus 4, for very very cheap).

In such a case, FB phones could actually sell a decent amount.