This is my biggest concern about the Facebook phone idea. The company could easily produce a phone that is just good enough to scare away its other phone partners, without being good enough to dominate the smartphone market. The Facebook phone could call into being the exact industry structure that Facebook wants to avoid. That’s why I see it as hideously high risk, a bet-the-company move that should be taken only when there’s no other chance to survive.
It seems to me that Facebook would be better off trying to negotiate deeper integration into iOS and Android, as well as building killer native apps. But, as Mace points out, that’s not easily monetized.