This is Facebook's third attempt at making a Facebook phone, after the first one was abandoned back in 2010. Last year they worked with HTC to create a smartphone, codenamed 'Buffy', but the only thing that actually reached the retail stores were the two phones, ChaCha and Salsa (the duo had Facebook button on them). However, it is said that the Buffy project is still being worked upon and the phone that is supposed to launch next year could be the culmination of that project.
According to one of the employees with whom the NYT spoke to, Zuckerberg feels that Facebook should make its own phone or it will end up being just an app. Having their own phone will also serve as a source of revenue, something that the free apps cannot achieve.
Our trusted source also say that there is no information on the OS the phone. But we guess Facebook would go with some version of Android. We also think that it would only allow access to the apps on the recently announced Facebook Store instead of Google's Play Store. This should allow Facebook tighter control over the kind of apps people install on their phones, including preventing installing apps for other social networks such as Twitter. MEAN!!!