It's not stupid at all. By giving into the racket, Netflix demonstrated that it's not a technical issue at all, so that argument no longer flies. It's clear that the ISPs are capable of supporting the service, they just don't want to.

Well not really. They can just claim that without being paid extra to do so, it wouldn't be cost-effective for them or whatever. I mean that's their public argument anyway - that these services cost them too much and they need to pay up.