As we previsouly noted the GoPhone Lumia 520s are locked to AT&T, but make an ideal start smartphone or backup device:
The GoPhone devices are locked to AT&T, but do not require any kind of contract or obligation over and above the purchase price, making them ideal for use as a back-up phone, or as stand-alone device (e.g. music player, GPS navigator). For cellular connectivity they can be used with any AT&T SIM and can also be used with a number of US MVNOs that use AT&T as their underlying service provider (e.g. H20 Wireless, AirVoice, Aio Wireless).
Similarly the Nokia Lumia 521s are locked to T-Mobile, but do not require any kind of contractual commitment and can be used with any T-Mobile compatible SIM card.
The $39.99 price point does represent a promotional price point, but this will have, at least in part, been authorised by AT&T. The likely scenario here is that the retailer (Amazon) is forgoing their profit margin in the hope of enticing consumers to purchase other items. AT&T may have also cut the wholesale cost of the device, possibly in partnership with Nokia, in the hope of gaining new customers and converting existing feature phone users into smartphone users (potentially resulting in higher revenue). More generally the low price point of the Lumia 520 / 521 is, as we previously described, the result of some careful specification cutting:
The low cost of the Lumia 520, in contrast to other Lumia devices, is achieved, in part, by cutting a few corners, the most notable of which are the downgrading of the screen quality and the absence of front facing camera, compass sensor, NFC chipset, and camera LED flash hardware. The hardware omissions do have an impact (e.g. compass functionality HERE Maps, video calling in Skype), but do not seriously degrade the overall Windows Phone experience.
Even allowing for the cuts it is hard to argue that the Lumia 520, at $39.99, is anything other than outstanding value for money. You will be able to find other smartphones at a similar price, but they are unlikely to be able to match the Lumia 520 / 521 for ease of use or all round user experience.
Update: Now appears to be sold out at the $39.99 price point.