>What if someone decides "free is not feasible, we start charging $20 per instance now".

This logic doesn't hold much water, however. Abrupt changes in pricing or other conditions happen with paid tiers as well

Yes, but combine that with a small-ish provider, this will also hurt them (e.g. see Google Maps price hike). Either way, if I use a service 20x a month and it costs $15, I can handle a hike to $20, that's fine, somewhat predictable. They also relied on those customers, they can't just get rid of all $15 customers.

But if a free offering suddenly says "We are getting rid of free, only starting $899 a month baseline, because we noticed our free users aren't converting and we only want to support enterprise from now on". Well, then I have to move everything.

Still a big price hike can come, but +20% monthly is easier to stomach than if I can't be sure what will happen to the free offering.