Your premise is entirely sound, except for the fact that the ISP market does not function like a typical market would. I am typically against all government intervention, except for the fact that there are some differences to these markets.
The phone companies and cable companies are an oligopoly. Competition is non-existent from new market contenders, and entry is so prohibitively expensive that we will not likely see very many, if any competitors. This results in copycat competition whereby we all receive common denominator service and any innovation occurs only as an upgrade to existing features, much like the cell phone market. Bigger screens, snazzier phones -- same horrible data service, same call difficulties. They don't have to truly change or upgrade because there is no alternative, and they simply entice people with eye candy. In the end I'm still doing the same thing with my phone that I did 10 years ago.
If the ISPs wish to change how they do business, it should be in addition to the service they've already committed to providing, not at the expense of what they're providing, especially in a market where competition does not exist. A base service was agreed upon when I entered into an agreement to pay for services. Under normal circumstances I could simply leave once the terms changed and go with a competitor who will give me what I want, but that's not possible in this case. I have no choice, and if they get paid from businesses to do this, why wouldn't they simply marginalize all of their traffic and turn the internet into a modern day television where the content is controlled entirely by companies who are willing to pay up?
You see Net Neutrality as a way to hinder future progress; I see it as a way to hinder future disaster. Given the track record of these companies, I have very little faith in them using it for anything but their own benefit, and that will always come down to whoever is willing to pay the largest toll.
As a small side note, I fully believe AT&T and Verizon would still be deploying their fiber networks, because those networks are a direct result of -real- competition between television providers and the phone companies. They all realize that the old television networks are going to change in the future, and they are engaged in a race to get there first. Television at some point will cease to be broadcast and become a choice for the consumer to watch on their own schedules. The end result of this competition for us is higher bandwidth, more choice, and more flexibility.