No, that's not at all what Microsoft is doing. Xbox Live doesn't run on dedicated servers. It's setup P2P. The fee goes to the servers which are used for scoreboards, friends lists, and to download content from. Aside from that, all P2P. However, it hasn't slowed Xbox Live sales a bit, and most people would be willing to pay $50 a year for centralized buddy lists and scoreboards.
The only Xbox Live game that is not P2P is Phantasy Star Online. That costs an additional $8.95 a month to pay for those servers.
Nothing wrong with making people pay, in fact, nintendo would be stupid not to. the biggest problem with what Microsoft is doing is that they're just collecting the money, and won't spend a dime until Xbox Live 2.0. Microsoft could easily stop all hackers from getting onto Xbox Live, but it would cost money to develop some software. So will we ever see it? Nope, not until Xbox Live 2.0 at the earliest, when we have to pay again.
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