We're talking about operating systems and how they handle security, so I don't think the Windows example is completely out-of-place.
What if your Wifi password is the same password you use everywhere? I know that's a dumb move, but you'd be surprised how many people suck at using different passwords for each login. Security is like an onion, it's comprised of layers. If you take away one of those layers, you increase the likelihood of an attack.
The free market argument is a weak one, and doesn't correlate with the reality in which we live. Have you seen the way "free market" ISPs operate in regards to competition? Doesn't work so well does it? With many geographical areas being locked into a choice between AT&T and Time Warner, there is virtually no competition. There are many who are arguing that ISPs should be treated as public utilities so that they can't throttle competing services that traverse their wires, requiring government intervention.
If you want to argue that the government is screwing something up and needs to get its hands out of something, I'd look towards the military industrial complex.