When the costs are underwritten by others, and the marginal cost to an employee or student is zero or near zero, I call that a subsidy.
I call that "flat-rate". Netcom charges $30 a month (I think) with no marginal costs (right?); Harvey Mudd charges $20K a year with no marginal costs (and certain other benefits, to be sure).
The point is that this "free" (marginally, at least, and largely free even in overall terms) service will generally outcompete one which offers similar services but which requires the user to pay for his use in a standard sort of way.
The reason that most access providers don't charge by the packet for Internet traffic is that it's not economical to do so -- a T1 doesn't care how much you put across it. As a result, they do flat rate service, users generate more traffic, and users see a slower network connection. But until people aren't willing to pay per-packet fees in order to deter excess traffic, this will continue. Eli ebrandt@hmc.edu finger for PGP key. The above text is worth precisely its weight in gold.