They slow down model releases, but don't slow down research and model development. They're not suddenly going to tell their army of researchers to go home. (In fact they can then focus/spend more on research, instead of the engineering needed to keep churning new models for production.)

This protects them from continuous model distillation by inferior models. So they only release a new model when a 3rd competitor catches up to their public production models' capabilities.

And the public gets a new model in 6 months or a year instead of every few months. But the new model would be a (1) gigantic leap in undisputed capabilities, (2) catastrophic in terms of job losses/replacements worldwide and they've had a year to prepare for the politics of it, and (3) the public would have access to the "tiny/medium/..." models while the big money/gov clients get the real super juice hidden behind the gates.

The frontier labs have dominant market share and distribution. They also have the majority of the compute.

They can make a lot of money by cutting down on R&D and inference costs until competitors can catch up.

They can also buy competitors that catch up.

And if they can get the government to regulate in the meantime, it’s party time for the monopolists!