1) nobody can compete with free.

2) the service and the advertising are tied together, with the amount of money being earned by said advertising is private.

The second point can be addressed without necessarily banning advertising, but having the advertising separate from the services - you have some kind of ad platform/etc that by itself is neutral and you can browse it (and look/click at ads) to earn money, which you can then choose to spend on anything, including other services. This means services still have to compete on price, even though that price remains "free" to the end-user as they're using the advertising platform to earn money to then spend it on services.