There is no free market in ISPs. All of your comments about the free market are true if there's a free market, but there isn't.
Eh. You could say that nothing in America is a truly free market any more. "Free" markets aren't a binary, yes or now, this or that kinda thing. They're matters of degree.
With all telecoms we're dealing with a legacy of old government regulated monopolies. Many of the laws, infrastructures, and mindsets are leftover from that paradigm. Those leftovers aren't doing us any favors today, yet we still cling to them.
Beyond the scary new government powers, I can't help but think that this net neutrality nonsense is a step backwards, back towards the old government regulated monopoly paradigm.
There are other ways, better ways, to deal with the threats that net neutrality purports to defend against, ways that don't take this step backwards, and don't hand over scary new powers to FedGov. Consider instead using the FTC to implement some antitrust, fair trade, and consumer protection requirements. I bet you'd find that treating it as a trade matter would solve the same problems that net neutrality solves, only in a smarter and safer way. I bet this won't be considered, though. Too much inertia to overcome.
I've spent too much time dealing with telecom infrastructures in foreign countries. It's a completely different world out there, a completely different way of doing things. The perspective is enlightening, to say the least. This is one area where the American way is not the only way to do things, and certainly not the best way. The government regulated monopoly model is NOT the right way to handle this stuff.