Yes and the fact that they don't see the difference between the user groups is symptomatic of the problems that have blighted their attempts to find a workable

Yes and the fact that they don't see the difference between the user groups is symptomatic of the problems that have blighted their attempts to find a workable business model. They offer little to no value to the people who can (and will) pay for things and a lot of value to people who can only structurally "afford" a free service. In that world charging is never going to yield success. The free-only users are going to find some alternative and in forcing them to do so you have sacrificed the goodwill from the free service in the first place, and the people who could pay won't do so in this case because you literally aren't offering them anything worth paying for.