I've also heard that there's service-quality expectations at play: if the wifi is free and it sucks, you're still happy while the hotels that charge for wifi to

I've also heard that there's service-quality expectations at play: if the wifi is free and it sucks, you're still happy while the hotels that charge for wifi to simply reduce demand (congestion) in order to have a better experience (speed/bandwidth) for those who actually pay. And it's further complicated by the value of ppv entertainment to the hotel - if Netflix/Hulu/whatever works just fine on the hotel wifi, the hotel is losing revenue. Cheap hotels with crapy free internet don't have to worry about that, but hotels that charge are also trying to recoup lost ppv entertainment revenue.