I've been party to exactly these types of policy discussions in Europe and elsewhere for a couple decades now.

The consistent political pushback against mandatory paid options that are ad-free is that it excludes people that can't afford them. It is unfair because it only advantages people with money. Therefore "free" is the only valid policy choice because there is always someone who can't pay. This limits what is possible as a practical matter.

The obvious alternative to an ad-funded model within these constraints is for the government to pay the companies for the service on condition that they remove ads from their country. Needless to say, the idea of paying "taxes" to Google et al to remove the ads is offensive to many of the same people.

So we are stuck with the status quo of "free" ad-funded services because people aren't willing to accept the necessary tradeoffs to change the situation.

The topic here is not ads vs not-ads. It's "why are companies who are already paid via ads also want to make extra money selling personal data to third parties?".