The Beats 1 Radio and other radio stations are available in the Music app, but those aren't part of the Apple Music on-demand streaming service. You can listen to the radio for free, yes, but you cannot search for specific songs to play, create playlists, or do any of the other things you can do with the Apple Music subscription. The on-demand streaming service itself has no freemium tier.
So basically, Radio will still exist. It's hard to see any material difference such as search and no search or skipping ads or not skipping ads as something that can't be charged for. If Apple still has iTunes Radio, then I think it will be hard for any state government to prove that Apple is trying to do away with free music streaming. It's got a pretty good version of it right now. Most likely that version will continue to be, by far and away, the most popular way to get streaming music from Apple. Time will tell.
I know I'd be hard pressed to justify $14.99/mo. when I currently don't even do cable TV, and instead opt for Amazon Prime alone. I do have an Audible subscription, but I listen to audio books every morning and evening for a 1+ hr. commute. Without that kind of intense love of or interest in a service, not many will pay for it. I think 100 million is a high number with a good enough service like Radio available. Seriously, we listen to real radio and can't search for songs. Pretty sure Apple has that one figured out.
I'm also pretty sure that the existence of Radio will prove their commitment to free content - unlike their book deals where they didn't specifically have a free service and had maneuvered to raise prices across the industry. Apparently CT and NY think Apple tried to manipulate prices again. All the above to say, I'm pretty sure the lack of a "freemium" service is a point mooted by the existence of Radio while the charge of price manipulation is an entirely different topic. Hopefully Apple has learned its lesson there.