Moving the antitrust problem into the FTC's jurisdiction instead of the FCC's doesn't make it go away.
Also, you're trying to have it both ways. You're also asking what the difference is between if the music service does it and if the ISP does it. The difference is that while both are bad the FCC can fine the ISP for doing it.
I can see why zero-rating might be of interest to the FCC and I'm glad they decided to hold off on any rules for now. So far, I don't think there's been any consumer harm.
As for the hypothetical where a service will reimburse for fees (like my bank does when I use out-of-network ATMs), I have a hard time seeing any FTC issue.
> I can see why zero-rating might be of interest to the FCC and I'm glad they decided to hold off on any rules for now. So far, I don't think there's been any consumer harm.
Why are you assuming that? Zero-rating raises barriers to entry which reduces competition. Less competition harms consumers.
> As for the hypothetical where a service will reimburse for fees (like my bank does when I use out-of-network ATMs), I have a hard time seeing any FTC issue.
Let's fit the analogy and see if you can spot it then. The ATMs are the ISPs and the ISPs have regional monopolies, so suppose there is one company that owns every ATM in California. Furthermore the government prohibits anyone else from constructing any ATMs in California.
The ATM company is also a bank. The ATM company is prohibited from favoring its own bank and charging its customers lower ATM fees, so instead the ATM company charges the same fees but the ATM company's bank offers to refund them. Do you see the trouble now? It's just a sham transaction to skirt the rule. And then the ATM company can raise its ATM fees to a hundred dollars because its bank's customers aren't paying them and it wants the other banks to go out of business.
We'll assume these are equivalent kids (being regular kids/paying customers). Awarding one with a better service (to kids this means toys and candy) than the other is absolutely punishing the other.
It might be the same problem, but it isn't the same thing. Who would the FCC fine?