I have to disagree about regulation. Most people have 1, maybe 2 choices of broadband providers. Where natural monopolies are involved, the free market has no chance to set things right, and government regulation is a necessity.
If we all had 3 or more cable companies to choose from, I'd agree.
But the regulation is a double-edged sword. The simple act of regulating makes it harder for new competitors to enter the game.
Let's say someone wants to compete with WOW and Time Warner (the two cable broadband providers in my area), so they get a reasonably-fast connection (but much lower than their competitors, since they have few customers) and get as many new customers as possible. They advertise that they are just as fast as the competition most of the time (not during peak hours), but the price is $10 cheaper per month.
This new company starts doing well, and then the BT users start to increase in proportion as the tech-savvy individuals migrate to this newer service. Speeds go down as a result, and it turns out that something like 50-60% of the traffic is long-running BitTorrent transfers. Customers start complaining of slow speeds and other occasional issues. This new competitor has a few options:
1. Upgrade the infrastructure
2. Repackage the service
3. Throttle BT traffic
Option 1 is a no-go because the company has just started to turn a positive revenue, and by the time money is found and spent on upgrades (which will also take a significant amount of time), a large part of the customer base will have left, and the company's reputation will be poor as well.
Option 2 also has the danger of losing customers. In order to have the intended effect, existing customers will have to make the choice of paying more for the same speed (Why'd I switch, anyways?) or paying the same/less for a lower "guaranteed" speed. Again, this choice is a net lose, although if the company is lucky and can do 1 and 2 at the same time, they might stay in business, at the cost of killing their momentum/reputation.
Option 3 is clearly the simplest solution with the least backlash, except that because of FCC regulations, it's illegal. Instead of being allowed to (hopefully) temporarily throttle BitTorrent bandwidth as the company increases its customer base and its infrastructure, it is quite possibly forced out of business.
Bandwidth throttling is arguably fair anyways. Consider your OS: if there is a long-running process which will saturate bandwidth, any good OS will put it at a low priority, so that bursty activity (browsing, small downloads, SSH sessions) have a reasonable response time. So we are perfectly happy to throttle our own bandwidth when it benefits us, but it is not okay for the ISP to do the same exact thing, only on a larger scale?
This is not what Net Neutrality is about. Net Neutrality is about preventing content providers from creating deals with ISPs that lock out smaller content providers. It is not about protecting users' "rights" to saturate the network at full speed and kill everyone's bandwidth, especially when the reality is that a substantial amount of that traffic is illegal.
"necessary" is always in relation to a preferred outcome. In your usage, this happens to be optimal economic performance when it comes to ISP. Now, first of, note that government interference int the ISP business does not in any way guarantee that there will actually be any improvement after all, how many times have we seen the government screw up even the simplest of maneuvers. Regardless, let us set aside that point for now. Consider what we are getting and what we are giving up for it. We are getting a marginal improvement in the efficiency of bandwidth providers, an improvement that future technologies (ie. WiMAX, etc...) may give us in time anyway, and in exchange for it, we are giving the government (specifically the FCC) permission to interfere and pass arbitrary mandates on IT companies. How long before the FCC uses this newfound authority to pass a patently idiotic proposition. Is the gain in efficiency worth this risk? In the case of BT throttling (and indeed for mast cases), I think the answer is, by a very large margin, no.
If we all had 3 or more cable companies to choose from, I'd agree.