If you STOP a service (or turn it to a PAID service) on short notice - and a service that is essential to people - then people will have to rush to find a solution... and will feel been extorted.
If you DEGRADATE the service more and more, people will slowly leave or upgrade to PAID, but they will have the choice.
Moreover, email is really a sensitive matter: it's a main point of contact for... well... email... but altogether for online service (IRS, website account, etc.) and in a way our digital life. So you can't just leave such a short notice. However, you have to let your FREE customer know that they have a choice to make quickly... so DEGRADATION is a good tradeoff I think