Yes, people can put up rabbit ears and get the signal for free.
So, cable says they do not charge for those channels - yet they will charge you for them in basic service - so the answer is BS - it added profit for the cableco.
Thus, if the cable company wants to make money on it, they need to pay for the copyrighted programming they are making money on - and that belongs to the local stations - so its pay the piper or don't carry it.
Cable also uses public right of ways to deliever its system. Do I get money because a cable system has cable under my yard? Maybe I should just keep cutting that line as its on my property?
Again, if cable wants to get OTA for Free, they should give OTA to everyone in their market for free whether they sub or not - as a condition for using the public right of way with their lines.
Otherwise, all the other arguements don't hold water on an apples to apples comparison.
(And if you think there ad revenue went to hell you need to read the Sinclair thread on AVS as its is spelled out that it doesn't work that way at all.)