That's right, penalizing heavy users is not against net neutrality, although depending on how a company goes about doing this it could yield some pretty bad PR

That's right, penalizing heavy users is not against net neutrality, although depending on how a company goes about doing this it could yield some pretty bad PR (see: AT&T throttling of users that have Unlimited plans). As to why an ISP should not be able to go further with offering you a "Non-You-Tube/Grooveshark-Plan", that is actually the main thing that Net Neutrality was created to stop. ISPs filtering traffic and access to websites based on content. The greatest fear that proponents of Net Neutrality have is that ISPs will begin walling off the Internet and restricting access to sites in an effort to increase profits. Currently, the internet is the closest thing that society has to pure competition and freedom of expression. Imagine if when Facebook first started, MySpace had spent millions paying ISPs to slow down all traffic to Facebook.com, they would have effectively killed it. Or imagine if a rich billionaire on the Right (or the Left) did not like what a certain website was saying about him and/or his ideology, he would be able to pay ISPs to slow down all traffic to those sites (thus providing a chilling effect on free speech and expression). And anyway, if your aim is to reduce the cost of an internet connection, the best thing to do would be to increase competition among ISPs. Without competition, even if the costs of ISPs go down, they have no incentive to decrease prices (unless doing so could increase their bottom line), in fact, they may even increase prices if the choice to consumers is either pay more for internet or have NO internet at all. A large problem with the high cost of the Internet is that many ISPs either through the government become the only company that can legally provide Internet service in an area (government supported monopoly), OR like it is where I live (Montreal, Canada) there is a small number of ISPs and they have carved out regions that they have decided NOT to compete.