Your math is correct. This is the advantage of any broker that charges per share. You lose that advantage if your style is to buy larger blocks of stock, then ticket charges are better.
I'd disagree as it depends on how the broker routes your order. If they are selling flow there is a good chance for say an order of 5000 shares that you get price improvement for say 100 shares but not necessarily the best price available at other venues. That could make what seems to be a $7 commission look like nice savings over a firm like IB charging 1/2 penny or less when in fact the slippage costs of say .01 on 4900 shares is $49 giving a total cost of the trade as $56. Anyone actively trading needs to look execution quality over commission. It is a much larger factor in the cost of a trade.
Wouldn't trading-through the NBBO on the 4,900 shares constitute a violation under Reg NMS? I am not saying that it doesn't happen anyway, but calling it "a good chance" might be overstating things a bit.
NMS does not protect you from your broker's bad execution - there are lots of things they can do that will get you terrible prices on large orders that are fully legal and NMS compliant. Trade throughs are possible sometimes, but rare; more common is how well your broker gets you price improvement and additional liquidity within the posted spread.
Reg NMS makes a trade-through a violation. There are some exemption. https://www.sec.gov/divisions/marketreg/nmsfaq610-11.htm I don't believe DEF was referring to a trade-through.
The "best price available" would mean the NBBO. If the broker fails to get the best price available, then the broker is trading-through the NBBO and violating Reg NMS, provided that none of the very specific Reg NMS exemptions applies to the execution.
This is an attractive and praiseworthy initiative by IB, but clients should be aware (and it's disclosed on the linked-to page) that IB takes half the client's earnings, rather than charging the client a fixed dollar commish for the service rendered.
If 50% of the revenues is not what you feel they should take, what is the right number for providing this service? You won't get more than that at another clearing firm.
There's an option to take a commission only / fee for service version of the stock loan program, but then you have to place all the offers to loan yourself and try to get them filled.
Since it costs IB little more to provide this service than any of their other brokerage services, the answer is that it should cost something similar to all their other products, i.e. they make a commission of less than 1%. Taking 50% is crazy, something they can do only because as you pointed out they're the only ones really doing it at the moment. The minute they get any competition that drops to a fraction of what it is now. In 1976 it would have been common for someone in the industry like you to ask, when a customer complained about stock trading commissions, "If you feel $100/trade in commission for a 1 lot retail trade is unreasonable, what is the right number for providing this service?" The answer, it turns out, is $1, or in 1976 dollars, $0.25.