In this case the cost of the service is close to zero, so it's virtually free. It was similar to phone operator charging for caller ID, an easy way to make a quick buck by flipping a bit somewhere.

That's not how it works. Supply and demand is a bit more complicated.

To simplify though, services and goods aren't priced purely according to what they cost to produce. You're thinking "the cost of production is the same, but a source of secondary profit is gone, so they have to raise the price of domains to compensate".

But actually the price also depends on what people are willing to pay. And that hasn't changed.

Could you please explain how in the specific example discussed here?

But you are not paying the same amount of profit, likely.