If you buy a product you should be able to use it even if you completely break all ties with the original vendor. Otherwise it's a service and not a product.
While I'd happily support regulating tethering as well, because it'd certainly make some things easier, with a little bit of thought you can build out home automation where it's all under your control. E.g. stick to zigbee and z-wave devices as the default, and get dumb zigbee and z-wave USB dongles, and connect them to an open source bridge, like Home Assistant, and you've got a good start.
Most of the above is Zigbee, which is open, but some is Tado and Lightwave, and if they go rogue it'd suck to replace the devices rather than just the hubs.
I think this is a distinction without a difference unless there's something legally relevant to that distinction. I don't disagree semantically, but I also doubt Phillips cares whether they call their lightbulbs a product or a service.
My solution would be to require refunds for hardware if the underlying software materially changes in terms of features, excepting safety features (I'm fine with disabling features because of an unknown risk of fire or something).
To me, the underlying issue is information asymmetry. The vendor knows when they're going to make changes, and users don't. The vendor knows which features get used and which don't, impacting the features they change, but users would have to guess whether they're a major usecase or not. The vendor likely has a list of lines in the sand they won't cross, but users don't know where those are.
Those used to be irrelevant because it wasn't possible to live-update the features of hardware, but it has become relevant. The free market is lacking information to make informed purchasing decisions.