There's a freemium video service in japan called Nico Video [0] that has been around for about the same length of time as Youtube. On the free tier, you're essentially limited to a really shitty video quality, somewhere around 480p. It also has ads and some kind of rate limiting. Besides subscriptions, they also do tie-ups and other PR related stuff. Video quality has never really been that good even on the premium tier. Their whole selling point seems to be community interaction, where by viewers can post comments directly into the video stream [1]. As far as I can tell, they've been bleeding money for the last decade though they seemed to have turned a profit this year.
My conclusion is that no, users would not get a better service.
My conclusion is that no, users would not get a better service.
[0]: https://www.nicovideo.jp
[1]: http://blog.nicovideo.jp/en_info/2013/01/post-037484.html
[2]: https://ja.wikipedia.org/wiki/ニコニコ動画#ビジネス