The problem is that once something is free there's no going back. You'll never be able to compete with free. Free is the new antitrust. The only players that will be able to survive and thrive in this model are the ones with the most data and the most socially exploitative techniques.
Lots of us are happy to pay for nice things like operating systems that don't use this model but there aren't enough of us to adequately fund such projects. We're just not a big enough market share.
The first example I thought of was when I was younger and wanted internet access. I didn't pay for dialup as long as I could figure out a free option. Our library had some free system you could dial into and I figured out a way to make reasonable use of that. Then when I moved, I used some of those Juno and Netzero type services for a while.
But once I had the option to pay for cable internet, I just went straight for it. The experience was an order of magnitude better, and there was simply no way to hustle a roughly equivalent free option out there. But looking back, I don't know if I would've considered a free, ad-based cable provider if it existed back when I was a broke young dude pinching pennies wherever I could.
Then again, nowadays, I would pay a bit extra to ensure my cable internet provider did not read, prioritize, or otherwise mess with my data if that was an option. But I doubt many others would choose to do that if it was extra charge for nebulous benefits.
One thing that adds to this feeling for me, is that any device I own that has an OS, unless that OS is Linux, feels distinctly hostile. I can't own a handheld computer that's not trying to enmesh me in an "ecosystem" of some sort, curate my options without my consent, do god-knows-what in the background, brick itself on a timer, and the list goes on.
It's even worse with laptops and desktops, unless I'm willing to devote big chunks of my dwindling free time to making a hobbyist OS (which, to be fair, is a breath of fresh air when it works) behave.
When even the terminals to our increasingly-hostile internet are themselves hostile, it makes me dream of just walking away from it all that much more.