UPDATE 1-Watchdog to investigate T-Mobile's Dutch music service

(Adds details, background)

AMSTERDAM, Oct 11 (Reuters) - A Dutch regulator said on Tuesday it would investigate mobile carrier T-Mobile’s new music service in the Netherlands to check it does not unfairly disadvantage competing services.

The Authority for Consumers and Markets (ACM) said in a statement it would examine the “Music Freedom” service, which provides streaming music without charging for mobile data use, a practice called zero-rating.

The European Union agreed its first ever net neutrality rules last year, requiring operators to treat all Internet traffic equally. The law neither explicitly allows zero-rating - exempting certain applications from a customer’s data allowance - nor forbids it.

The Netherlands is a staunch opponent of zero-rating and consumer groups are worried applications with free data will have an unfair competitive advantage.

The ACM investigation was announced shortly after the Dutch Senate on Tuesday passed a net neutrality law which telecoms industry groups said took a stricter interpretation that would go against the EU regulation.

The new Dutch law will also threaten the development of a single EU digital market, said global mobile operator association GSMA.

“The implementation of the revised law will harm consumers by stifling innovation and limiting the choice of services available to Dutch citizens,” it said in a statement.

EU telecom regulators have said they will limit the extent to which operators may exempt some applications from a customer’s data usage. For instance, zero-rating will not be allowed once a customer has used up all the data in their subscription. (Reporting by Anthony Deutsch; Additional reporting by Julia Fioretti; Editing by Adrian Croft and Mark Potter)