That "free Netflix" might mean they are taking a chunk from Netflix, rather then charging the customers.
Except the marginal value to Netflix is too low to make that worthwhile. The marginal value to Netflix is exactly the additional
extra subscribers they will get, then take only the
profits per each new subscriber, and minus the additional operating costs they will incur by having to provide more data to everyone else. e.g. say half the ISP subscribers already have Netflix, then you'd be lucky to e.g. get another 5% of people paying $10 a month for Netflix because it has free data. Netflix is likely making about $1 in profits per subscriber, if that. Then divide that by 20, that's how much free data they could afford to subsidize per ISP subscriber, perhaps 5-10 cents worth per month per customer. Any more than that, and the additional costs will exceed how many additional subscribers they're picking up.
Also, for cable companies that also act as ISPs: them not charging for
local server data is not the huge problem you make it out. Content on a local server
shouldn't count as data. External bandwidth is an entirely different resource to local content bandwidth. If you penalize cable companies that give non-metered status to local content then that's going to push more of the users onto the public bandwidth instead. So, sure, more people will use Netflix then. However, the main result of that will be
slower Netflix, as a higher proportion of the ISP subscribers will be using the same finite amount of external bandwidth. Nobody would get better service from applying strict Net Neutrality to
all data in this scenario, and I suspect this is actually the cable companies main argument / issue.