If YouTube is actually lobbying against this both in public and in private, then I would personally consider that extremely strong evidence this is really bad. However, I have no inside info on their private position.
Profitability and growth aren't dependent on market dominance, even in tech.
Vimeo aims for $100mil this year: https://www.reuters.com/article/us-iac-interactive-vimeo/iac...
YouTube Could be a $15 billion business this year: https://www.fool.com/investing/2018/02/18/youtube-could-be-a...
Even in your article it talks about how Youtube isn't exactly profitable, and is dragging down Google's average CPC for the business.
"The market" is a statement about demand, not supply. The market can still shrink if the legislation goes through, because the legislation can have secondary effects that cause people to be less interested in consuming content on a tube-style platform.
I think you'd be surprised at the reach of educational resources like Khan Academy and MIT's Open Courseware. These things aren't 'necessities' only if you don't consider it important to educate yourself.
Or in this case, 80% of a large market more than 100% of a small one.
If the proposed law actually is too expensive for them, I could see them attempting to weaken it to a sweet spot where it's affordable for them, but expensive enough to still keep others out of the market.