You are telling that it is fee free. But it is an ethereum token so every transaction needs gas for it. If you use other cryptos for payment it would also need some gas maybe iota won't ask for it. So you are not counting gas as a fee or do you have an alternative solution for it?
Agreed. There are gas costs. However, keep in mind that gas is only applied once the state/payment channel is closed and posted on the blockchain. Therefore, say the channel is open for 5 transactions, you would only pay gas fees once for those 5 transactions.