Dave Winer is hardly the only one who seems to think that services should be free:
I talked with Matt and Scott Beale about how happy I am that Flickr is still free, and I was very pleased with how generous Yahoo was to let us use it without ads. They looked at me strangely and asked if I had a Pro account, and I said I did, it was a gift from Stewart. Then they told me that's why I didn't see any ads. Ahhhh. I guess when I point to something on Flickr y'all see ads? Uh huh. Oh. Kay. Now I'm slightly less pleased than before.
Well, if they aren't going to show ads, they'll have to fund the site somehow. What would you suggest? Subscription fees by members, such that the members don't see ads? Wait.... that's what they do now! So what does he want? Apparently, he wants them to host pictures freely for all comers, and just make money magically somehow, in a way that he never has to see.
This reminds me of the argument that tools like Cincom Smalltalk should be free, and that we could make plenty of money simply by charging for support. Umm, sure. That works if the free tools are loss leaders (like Eclipse, say) - it works less well in cases where you are actually trying to make money - JBoss comes to mind.
Under the old developer license for $X, and then $Y for maintenance and support model, ParcPlace (and its descendants) went under. Sure, there were plenty of other missteps along the way - but that model simply doesn't work. Unless you can guarantee a large (and always growing) number of new seats sold each year. The reality is, optional support licenses don't sell that well - prospects tend to see that as a place to save money, and then only buy them when they really need them (consider: how often do you spring for the extended warranty on things you buy personally?). If you give the tools away up front, you get even less money.
Ultimately, you have to pay the developers. Show me a model that works for that - either for tools, or for websites. In Flickr's case, I fail to see how ads are that irksome, when the end user (i.e., the one incrementally adding load to the site) gets to use the site without charge.