Furthermore, it's not really clear that the socially desirable outcome is to promote competition at the line level. Because each producer has to spend billions on infrastructure to serve fewer people (because the more providers there are, the fewer customers for each), costs will be higher and profits lower the more companies enter the market.

The best solution is in fact government regulation. Instead of promoting competition at the line-level, governments should (and most OECD countries do, with the exception of Mexico, the Slovak Republic and...the US) require local-loop unbundling, whereby the incumbent telco is given a monopoly on laying lines to houses but is required to lease their lines to competitors at a set price.

For more information, read the Berkman Center's Broadband report, which was commissioned by the FCC and is presently the more thorough empirical look at these topics. It's available here: http://cyber.law.harvard.edu/pubrelease/broadband/.

ATT used to say that the phone network was "a natural monopoly". Today we'd laugh at that. Really, this example is so glaring that I'm surprised you'd offer this argument. And in fact you acknowledge that the local loop is separate from the actual network. But the difference in the US is that this is a free market -- I can choose to use Embarq (the traditional copper-wire circuit-switched carrier), or I can (and do) use Vonage, or scads of other IP-based carriers, or I could do like many people do and just use cellular. We the consumers are getting to choose just how this unbundling happens.

If, for some reason, you think that there's something sacred about telephone, while data is different (or vice versa), there are other counterexamples as well.

In New York, while electrical transmission remains a monopoly, generation has many choices. It works just like the phones: where the infrastructure demands a single source, that's what we get, but that doesn't mean that the people that provide the wires can be the only one involved in the business. (I pay more for electricity that's generated in part by windmills)

And most obviously, it seems to me that most people have access to two broadband carriers, albeit their capacity varies widely (but that's what markets are all about, right?). Virtually everyone I know has a choice of a DSL provider or a Cable provider.

Sure you can use Vonage for phone instead of AT&T (or whatever), but you can only do that because you have a pipe to the internet. VoIP services are means of getting phone over a different pipe, but you still need a pipe.

You also seem to miss the point of my comment: governments should have policies like mandatory local-loop unbundling (also called line-sharing) which produce competition where it makes sense (providing backbone) instead of where it makes little sense (providing the "last-mile" connection).

Finally, a duopoly is better than a monopoly, but not by much. It still gives the players far too much control of the market.

You're missing the point, services like voip could end up priced arbitrarily in the interest of the carrier. What if non-AT&T voip services were priced out of the market? This is not beneficial to the consumer. It's easy to claim wireless or some new technology will always provide innovation and options, now, when the market is new and less consolidated. 10 years from now, there's no reason to think a single company won't own cell networks as well as cable networks, or any other medium for that matter. The status quo sucks! I don't know about your area, but around here ISPs rarely, if ever invest in infrastructure, and upgrades are unheard of. My parents in a rural area have been waiting for years for any land based broadband options, 3g doesn't even work there!

Again, the Berkman Center's study is very well-done, and if your skepticism remains I encourage you to at least skim it. Otherwise, you're arguing from a position of ignorance and are contributing little to this discussion.

The alternative is "government control of the privately owned infrastructure that makes the Internet possible."

How many choices you have doesn't determine whether something is or is not a free market. That's like saying that there is no free market in tablet computers because you can only buy iPads or JooJoos. Men are free to create and sell their own tablets, just as men are free to create their own ISPs. That is what makes it a free market.

Of course, the ISP market isn't totally free, but the solution is to remove regulations that violate the property rights of the ISPs. Net neutrality only makes the market less free.

This is why i took issue with his car showroom example. Its a big difference when there are plenty of places to build a showroom. There's only one easement behind my house. The poles are owned by comcast, the ground has sewers.

Even if there was no other way to get an internet signal into your house, that still wouldn't justify violating Comcast's property rights.