I've been playing COD4 for 3 years ONLINE FOR FREE. I bought the game, walked out of K-Mart with it, and haven't paid a CENT since. Paying to play games that you own is like paying to listen to a CD you've already bought. Microsoft have their hands down your pants.
It shouldn't be free, xbox is better than PS3, however, it should be cheaper. How about you can by per 6 month or 12 month. 6month = $6 or 12 month = $10.
I think the Xbox Live service is superb value for money and offers a lot of great features. If it was to become free (which I can never see happening) the cuts would more then likely have to be made.
You know what they say, you get what you pay for. There is a sense that's there's more to lose if you get your xbox live account banned when you paying for membership, discouraging more people from cheating maybe.