Following the money (Score 1)

From a service provider standpoint supporting email, particularly webmail, is a true cost center. And depending on the core business of the provider it may not be economically viable. In a free market world why not partner with a leader to provide the best possible service at little to no cost.

We've partnered with Google to provide a seamless integration with Gmail and Apps which removes the hassles of setting up MX records, etc. which means even the most inexperienced web user can utilize the Gmail services for their domains. In doing so we've improved customer satisfaction and driven down our costs, which in turn means we can continue to offer very low cost domain registration.

It's worth noting that the average person still uses a free email address as their standard form of e-communication. Even those that are web savvy and have their own domain names. We find that the majority of our registrants use a Gmail, Hotmail or Yahoo! email address as their default. Tucows notes the same.

The reality is that companies with a vested interest in capturing eyeballs are going to continue to dominate this space. When it is no longer profitable for them to do so FOSS might be viable, but until that point I wouldn't bet on it.