I don't think that a Mass Effect prequel is likely for some time, because they've created this setting and to go backwards in time would be to contract it (as you rightly pointed out); they've made all these races and it would be a shame not to put them to good use. But agency, I think, has nothing to do with it. They could very well make an excellent prequel game with a fresh storyline and a great deal of player agency. But they probably won't.
This is a great post and I agree with everything, particularly this last bit.
A prequel game is entirely possible - and it looked like the original plan was to do a prequel or midquel - but given that the prevailing player sentiment seems to be in favour of something set after ME3, that's what they've decided to do. There's nothing standing in the way of a prequel as far as player agency or storytelling is concerned, but many fans seem adamant that they want a sequel (and fair enough, I guess - I'm sympathetic to the idea that they want to keep moving forward)
That does introduce a much more challenging narrative situation, in the sense that anything set after ME3 in the Milky Way has to either deal with the consequences of Shepard's choices, or ignore them entirely. I don't think either is a satisfactory outcome at all, which (IMO) makes a new setting, maybe even a new galaxy, almost required if they want to:
1. preserve the canon of the player's choices over three games (insofar as it applies only to the Milky Way, which will probably not be featured again as a major location)
and 2. create a new range of species, conflicts, areas, characters, and stories to tell.
From ME3, and particularly from the Extended Cut, it was made extremely clear that all of the story arcs in Shepard's trilogy have been wrapped up. Some fans keep posting about wanting to see the consequences of their choices on the galaxy (or reunite with Liara, blah blah blah) but to me it seems obvious that Bioware already did this with the new ending slides, and especially the Citadel DLC. All of that is over now, and I doubt we'll be seeing much of it again in the future.
A new galaxy is the perfect opportunity to take the existing foundations of the IP (the races, technology, and some iconic motifs like N7 and the Mako) and put them in an entirely new setting, with new stories to tell. The alternative would be a tired retread of familiar places, stories and characters - which seems like a bad thing to do when you've got an eager new team and a new generation of consoles.





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