Are network neutrality laws a good idea?

I used to be a big supporter of network neutrality legislation. However, after reading an interesting paper by Tim Lee of the Cato institute I a have changed my mind.

Tim's main point is that what supporters of network neutrality really want is what he calls the "end to end principle" i.e. that the network operator should not concern themselves with the content of traffic over their network and that they should leave such concerns to the users at either end of the network link (typically the service provider and the consumer). He argues that network operators who operate such an open content-neutral service have a natural economic and technical advantage which ensures that they will dominate even without government regulations backing them up. He further argues that whenever governments get involved in regulating rapidly changing markets like ISPs they are almost certain to make a mess of this. He gives several historical examples of where government regulation which was intended to support consumers ended up protecting poverful vested interests instead.

I am now veering towards the view that market forces can be an effective way to disuade misguided network providers from unfairly restricting the use fo their network. However, I still have two significant caveats:

1. Competitive forces only work where there is real competition going on. In many parts of the world consumers have no choice of broadband provider. In fact there are many examples where a telecom incumbent has an exclusive license to provide services but they don't cover their area fully. These companies then use their license to stop other companies from offering alternatives to the unlucky consumers who are left off-line.
   
   I think governments should aim to ensure that all citizens have at least three broadband providers to choose from. The recent growth of a number of innovative wireless broadband technologies should make this feasible even in rural areas.
   
   
2. The competitive forces argument also falls down when the discriminatory network routing is being done in response to government regulation since that regulation will apply equally to everyone in the market. I am specifically thinking about "The Great Firewall of China", but the recent court cases trying to force ISPs to block traffic to the Pirate Bay web site gives an indication that if we are not vigilant this kind of network censorship could become much more prevalent.
   
   In Tim's paper he mentions that there is a general consensus that blocking virus attacks is a generally accepted legitimate deviation from pure network neutrality principles. However, blocking copyright abuses is an area where there is much less consensus.