Not the first I've heard of this idea, but the most recent was yesterday. See this Red Herring article.
I think this will be interesting to watch. I'm not an expert on ISP's, but it seems to me as though the largest ones are paid services if that is any indication of a consumer's appetite for ad-sponsored services. Our data show that consumers choose wireless service providers based on quality of coverage and cost. As this service will run on existing infrastructure, it's likely to be comparable provided the handsets are. Cost – well, let's hope it's free or costs less since it is ad-sponsored. My hesitation in being excited about this concept lies in consumer data we've collected about consumer interest in ad-sponsored services. A very small percentage (i.e., single digits) of consumers we surveyed were interested in either free airtime/talk minutes or handsets in exchange for being targeted with advertising. The numbers didn't change even when we looked at just those subscribers aged 18 to 24 years.