Here's my understanding of it. (I'm sure someone else will correct me on the details)
The tl;dr summary of it is because it was a defence against Telstra's monopolistic practices.
Zero Rating developed because of a few factors:
Telecom Australia were the only providers of international internet connectivity because they owned all the landing points in the country.
Telecom Australia also owned the first comprehensive nation-wide data/internet transit fiber network around the country and to many cities.
Telecom Australia (which was originally entirely government owned) really didn't give a damn about competing - you either paid their price, or you didn't get connection.
I believe Optus may have had access on one or more submarine cables, but that was primarily for phone service.
Telecom Australia eventually became Telstra. They also built an ISP called Bigpond, which was their home-internet brand.
I believe it was Southern Cross Cables that was the first carrier-neutral submarine cable, and that wasn't online until mid/late 2000 in Sydney.
So, the zero-rating of data started as a way of letting Small ISP's customers download content from international sites, without it costing the ISP a fortune.
I remember pretty much every ISP had their own little quota-free services that they'd host themselves. Game servers were a big one, along with patches, mods, maps, movies, and even some would provide mirrors for the early music streaming services like DI.fm
At the same time as all this was happening, various ISPs were setting up and/or peering with the first IXs and allowing users to access services on the other ISPs for free. At first this was just within your state, but then some ISPs built up interstate capacity and allowed free access to content in other states.
This was coinciding with the rollout of ADSL, again which outside of the capital cities - was largely a Telstra undertaking at first. For Telstra, they already owned all the copper, fibre, and buildings to put it in - so it was a relatively cheap proposition. There was a lot of disputes between Telstra and ACCC over whether Telstra would be required to provide access to their copper network and also the ADSL Network, and under what terms. Eventually other ISPs won the right to install their own ADSL gear in Telstra exchanges (although Telstra screwed with that as much as possible) and so they built out/extended fibre networks to all the phone exchanges for this.
Telstra also made their own online services (Bigpond Movies/Music/Sports/Games/etc) quota free to their own customers. My understanding is that they still didn't do a settlement free peering for access to that data.
Optus effectively followed Telstra's lead in everything with few exceptions.
The tl;dr summary of it is because it was a defence against Telstra's monopolistic practices.
Zero Rating developed because of a few factors:
Telecom Australia were the only providers of international internet connectivity because they owned all the landing points in the country.
Telecom Australia also owned the first comprehensive nation-wide data/internet transit fiber network around the country and to many cities.
Telecom Australia (which was originally entirely government owned) really didn't give a damn about competing - you either paid their price, or you didn't get connection.
I believe Optus may have had access on one or more submarine cables, but that was primarily for phone service.
Telecom Australia eventually became Telstra. They also built an ISP called Bigpond, which was their home-internet brand.
I believe it was Southern Cross Cables that was the first carrier-neutral submarine cable, and that wasn't online until mid/late 2000 in Sydney.
So, the zero-rating of data started as a way of letting Small ISP's customers download content from international sites, without it costing the ISP a fortune.
I remember pretty much every ISP had their own little quota-free services that they'd host themselves. Game servers were a big one, along with patches, mods, maps, movies, and even some would provide mirrors for the early music streaming services like DI.fm
At the same time as all this was happening, various ISPs were setting up and/or peering with the first IXs and allowing users to access services on the other ISPs for free. At first this was just within your state, but then some ISPs built up interstate capacity and allowed free access to content in other states.
This was coinciding with the rollout of ADSL, again which outside of the capital cities - was largely a Telstra undertaking at first. For Telstra, they already owned all the copper, fibre, and buildings to put it in - so it was a relatively cheap proposition. There was a lot of disputes between Telstra and ACCC over whether Telstra would be required to provide access to their copper network and also the ADSL Network, and under what terms. Eventually other ISPs won the right to install their own ADSL gear in Telstra exchanges (although Telstra screwed with that as much as possible) and so they built out/extended fibre networks to all the phone exchanges for this.
Telstra also made their own online services (Bigpond Movies/Music/Sports/Games/etc) quota free to their own customers. My understanding is that they still didn't do a settlement free peering for access to that data.
Optus effectively followed Telstra's lead in everything with few exceptions.