My letter's slightly different. The paragraph about 4oD states:
"From March we'll also be giving you more free on-demand content with new 4oD showing popular series from Channel 4, E4 and More4, such as Shameless, Teachers, Black Books, You Are What You Eat and Grand Designs, to watch for free whenever you want. In addition 4oD comes with free C4 Catch Up which lets you watch popular C4 programmes up to 7 days after first shown. If you wish to watch 'Premium Series' such as Ugly Betty and The O.C. you can do so from just 99p per episode."
So it seems the basic 4oD is free, with some additional Premium Content.
btw my 2Mb Big Pack + Music has dropped to 24.99 - but of course it doesn't say what this includes (I'm half expecting the music to still be charged on top of that). Even so, it's £3 off the old price.