Well, legally, Sony owns the software, so they can do it.  Arguably, you don't have to upgrade when it was removed, but of course, you lose some other features which perhaps were not explicitly advertised.

I really think some laws surrounding ownership of the software were changed.  I mean, you can't use a PS3 without the software - you don't have a choice here.  Unlike a PC, where you can install what you want, you're tied to whatever is installed (unless you hack it), and the device is useless without the software.  So in essence, you don't really own your PS3 at all.