First, PLoS fees are lower and as a nonprofit only have to support operation (no profit). Also as a nonprofit there is some transparency as to where those fees go, so I assume that publishing there really does cost something like $1600.
Second PLoS's fee rules include the sentence "Authors' ability to pay publication fees will never be a consideration in the decision whether to publish."
Elsevier's "unfair advantage" (something we're supposed to look for on HN) or IP is their ownership of journals that acquired renown over decades. Publication in those journals as opposed to others has, depending on your field, tremendous effect on tenure and grant opportunities. It takes a long time to transfer that repetitional benefit to other institutions like PLoS.
That's why physics (with a more fluid tradition of journal bona fides and a wider use of preprints and passing papers around) was the pioneer field for open access and the like while, say, medicinal chemistry has been a laggard in this area. Doesn't mean the researchers want it that way, but those cultural traditions take a while to change.
If UCB and some other high profile institutions (I'm looking at you, MIT!) can declare a policy away from these journals it will provide cover to allow others to do the same.
You couldn't choose a worse example than that. MIT famously screwed Aaron Swartz legally over public domain (pre-1923) papers, by baselessly claiming that his access had been "unauthorized" when in fact it was entirely consistent with their own pre-existing policies! They are a bad actor in this whole issue and aren't going to do a thing.
infamously is what you mean, particularly considering "screwed (over)" is very much an understatement in regards to the sombre culmination of that legal case. [0]
Also I guess some (theoretical) physics/math papers kind of stand on their own. If you proved the Poincaré conjecture, it doesn't matter if you post it in Science or on your WordPress blog: anyone in the field can verify the correctness of your work. Contrast with life science where reproducing work is hard and bona fides count for much more.
There's no inherent reason a non-profit can't provide those bona fides just as well, though. I also hope institutions do the right thing here.
You mean the Web? For the Internet, no they didn't. It was created by a US military organization.
It's not hard for me to imagine that a professional high-quality academic hosting service costs something like what PLoS charges. Their budget is probably publicly auditable. I work in enterprise software, though, so I've become kind of inured to seemingly absurd costs for technical solutions.
I used to work in academia, where I became inured to PIs spending crazy amounts (millions per year) on equipment and lab services, which makes me think $1600 for a publication really isn't that big a deal for most developed-world STEM labs. Although I'd rather they spend it on making post-doc salaries livable.