>It doesn't really matter what the AI companies want, if they misjudge the market somebody will just start a competitor and take it.

The vast majority of people are uninterested in local vs non-local models (not just LLMs but ANNs in general), only the services the models are providing. Even if performant local models can actually be served on device quickly, if the frontier labs don't want to go that way, they simply can and there's little threat the market can be taken from them that way.

If you can serve local models, the 'advantage' is that they can be run on the users device without that incurring any cost to you thus allowing flexibilty in pricing, but if such models can be made then whatever cost would be incurred to labs running on their own servers would be a rounding error and also inconsequential to them. That is to say, they can also compete with you on pricing. So unless someone comes along with something the frontier labs can't figure out or replicate, then it doesn't matter. Open AI might be 'forced' to drum down prices but only in situations where costs have also been drummed down.