There's a third possibility between works and doesn't work:

Works but not quite good enough to make the case against commoditization.

If open source or on-device AI gets good enough for 80% of consumers, then this stops being a consumer product and the only real market is people who need the high-end models. If those models are slow and expensive, certain tasks like scientific and math research can tolerate slowness, but they run up against the costs. If they're expensive, the tech industry can afford them but runs up against their inefficiencies.

We need to talk about how well these improving models work in multiple dimensions: Accuracy, performance and cost. All three have to improve considerably before the debate dies down.