You need to figure out if you are in fact offering the same service or do you have significant differences in product, market and customers. If it's the same s

You need to figure out if you are in fact offering the same service or do you have significant differences in product, market and customers. If it's the same service, then who is right about the better business model. You think this service provides enough value that people will pay for it, this competitor thinks free is better, who is right? who is more right? Sometimes business models change (ask newspapers) or competitors force you to take a loss/make changes on things you would rather not. This is business. Hopefully not, but you might have to build that freemium version for the short term and figure out a way to add better price discrimination to it. How much market research have you done? Entrepreneurs building for themselves have a huge advantage but are also often most likely to not do enough market research, assuming many others out there think just as they do.