You're correct to ask these questions. The truth is that the entire motivation behind Net Neutrality is predicated on hypothetical behavior by an ISP that nobody has ever actually observed in reality for the exact reasons you describe.
ISPs have a lot to win with keeping their monopolies as it is.
Given the amount of alarmism it actually seems to me there is heavy propaganda advocating for the status quo, for some reason, perhaps they want further regulations that can be done more easily through net neutrality. Not sure.
Once you establish that the FCC can regulate the internet, you can do all kinds of very opaque regulation that is difficult to change (e.g. other guy needs to control White House and Congress or sue the government and win).
Heavier regulations usually favor established players who can engage in regulatory capture, to shape the new rules to prevent future competition from smaller companies and firms that don't even exist yet. Often times they cloak this motivation with justifications that sound uncontroversial and difficult to object to.
I don't know specifically what the real goal is here with Net Neutrality, but that's the sort of thing that happens in other industries all the time. Often in terms of "safety" or "helping the environment."
Your comments boil down to "distrust of government/more crony capitalism" message for me.
I agree, if that is where your heart is at. U.S. government is very dysfunctional. Corporations buy up representatives, regulatory agencies are politicized and made into paper tigers or weapons to attack enemies with, etc.
I don't expect that to change in the U.S., and in fact I expect deregulation and a non-neutral net real soon. Then, we'll begin the slow slide into the nightmare scenario where ISP's can extract more rents from both websites and users. Extorting fees from websites for accessing the fast lane to the users will be the favorite way of simultaneously increasing profits and wounding competing media companies that don't control their own last mile fiefdoms.
When the quality of service dips too low and the costs rise too high, I believe the result will be a populist wave of anger sweeping over these companies. They will be broken up into smaller companies based on function, municipal ISP's will get established to handle the last mile, and there will be harsh regulations put on what ISP's can legally do with data flowing over their pipes.
My frustration with the net neutrality folks (probably similar to yours) is their insistence that we "REGULATE IT" where no specifics are given and is not really a plan, leaving things open to mischief. The devil in the details here is establishing what is reasonable and fair for an ISP to do -- and we then fairness hug the ISP's to death.
You argument would make sense if you were talking about the regulation of lemonade stands.
This point seems to be lost on all people making an econo-governance argument against NN.
Telecom tends towards a natural monopoly.
The power is with the industry, not with the consumer.
It will always be so, because of the inherent nature of the industry, and that is why the industry shows up as a text book example of industries which require legislative intervention to result in optimal outcomes for consumers.
In particular:
Telecom requires large up front investment in fixed costs. You need to lay cable, build infra, and more.
This immediately means that you cannot have a fluid competitive marketplace, as new entrants are curtailed by the costs.
Without point 1, you cannot competition.
Without competition you cannot have innovation, and differential servicing.
