It's a great strategy from Google especially if they think they can match any move from Amazon in this way, and if they can sustain it for a long period of time.
It's basically game theory, and at this point, Amazon would be smart to stop cutting prices just for the sake of out-competing Google on price. And if they do that, Google might also stop doing it, because as in game theory, they know continuing an aggressive price war in this manner is only going to hurt both of them, because they are both very resilient and they won't take each other out in this way anyway.
Amazon, the market leader, trying to beat Google on price, would be like Coca-Cola trying to beat Pepsi on price, and racing to the bottom. Coca-Cola has learned a long time ago that it's okay if Pepsi is slightly cheaper. Same goes for Verizon and AT&T.
I think they will both still continue to cut their prices at a regular time period, as hardware prices fall, but only for the sake of expanding the market and getting new classes of customers that otherwise wouldn't use their services, and not just to try and steal from each other.