It is going to stay free and force MS to make their service free as well. That scenario is more likely than PSN not staying free. So it should be "Live is Going to be Free Kids...".
There are plenty of other models besides subscription based pay to be a part of models. There will be stuff to buy like Qore for instance and many other things for Home and it will remain like that. MS sells enough already with all their Live Arcade games, movies, gamer pics, themes, etc. So there is no reason for them to charge you to play a game that you bought online and eventually they'll realize that.
You can't blame MS though. Without competition they were free to do whatever they wanted, and they just happened to decide to charge for something that under normal circumstances would have remained free. For this scenario to take place PS3 is going to have to sell more third party titles than MS though, and that probably will start to happen with the free online play.
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