First, in any case, the right solution is to make this business model (treating your users as a product, whether by offering free service or heavily discounted/subsidised product) simply illegal. It violates the way market is supposed to work and exploits information asymmetry—regulation against which there is plenty of precedent of.
This makes the rest moot, but I will still list why I don’t think it’s like you say at least in case of social media.
If social media was paid only (like any actual product or service intended to benefit the customer) and users were choosing between paying different amounts rather than paying vs. not paying, it would kill the network effect outright; platforms would have to struggle to keep users, and to that end would start implementing features users want and need (rather than exploiting their emotional state and employing dark patterns[0] to boost ad impressions).
The interest of a service provider is aligned with the interest of the customer. The incentive to do bad unethical things to the user may exist either way, but it is when the user is not the customer that it becomes a natural course of things. It is still possible to “double-dip”[1], but the difference between users being customers and users not being customers is that in the former you can be an honest service provider and sustain yourself by doing things in the benefit of the user.
[0] For example, have you noticed how Instagram’s GUI is carefully designed to require you to tap two times, with a teeny tiny chevron as the only indicator, every time you open the app to switch to the timeline of people you actually follow, rather than whatever the algorithm suggests (and how carelessly swiping photo carousel left makes you exist that carousel, and lose the scroll position)?
[1] Additionally, note that the examples you named (cars, IoT, OS[2]) make a lot of money from a single purchase and/or are fairly inflexible to switch away from, compared to social media where interoperability is pretty much solved with open standards.
[2] What is a paid-only streaming service that “dips” into advertisement in some unethical way?
This is not about regulating away illegal behaviour. Criminals will exist. It is about making [what we have reasons to consider] de facto scammy behaviour to be de jure illegal behaviour. Then it becomes a matter of enforcement.
This makes the rest moot, but I will still list why I don’t think it’s like you say at least in case of social media.
If social media was paid only (like any actual product or service intended to benefit the customer) and users were choosing between paying different amounts rather than paying vs. not paying, it would kill the network effect outright; platforms would have to struggle to keep users, and to that end would start implementing features users want and need (rather than exploiting their emotional state and employing dark patterns[0] to boost ad impressions).
The interest of a service provider is aligned with the interest of the customer. The incentive to do bad unethical things to the user may exist either way, but it is when the user is not the customer that it becomes a natural course of things. It is still possible to “double-dip”[1], but the difference between users being customers and users not being customers is that in the former you can be an honest service provider and sustain yourself by doing things in the benefit of the user.
[0] For example, have you noticed how Instagram’s GUI is carefully designed to require you to tap two times, with a teeny tiny chevron as the only indicator, every time you open the app to switch to the timeline of people you actually follow, rather than whatever the algorithm suggests (and how carelessly swiping photo carousel left makes you exist that carousel, and lose the scroll position)?
[1] Additionally, note that the examples you named (cars, IoT, OS[2]) make a lot of money from a single purchase and/or are fairly inflexible to switch away from, compared to social media where interoperability is pretty much solved with open standards.
[2] What is a paid-only streaming service that “dips” into advertisement in some unethical way?