One could argue that it would be bad for the consumer since their subsidized divisions have zero incentive to improve. It's nearly impossible to beat a free off

One could argue that it would be bad for the consumer since their subsidized divisions have zero incentive to improve. It's nearly impossible to beat a free offering, so no competition will arise. Therefore innovation halts. This is what Google's been doing for years. In a healthy market we could have incredible email providers, video hosting services, calendars and whatnot.