That's an Austrian school conflation, and that largely because it refuses to recognize that market failure is a thing. Originally, "free" meant "where actors compete freely" - this excludes not just government regulation, but also monopolies. Since in practice monopolies form in unregulated markets over time, at some point, such a market can become less free than one with active intervention to bust monopolies.
>refuses to recognize that market failure is a thing
So much this. I call it "Econ 101 Syndrome". My undergrad was in Economics, and the amount of damage that has been done by requiring Business majors (and others) to take Econ 101 and only Econ 101 is staggering. People walk away from those courses seeing the world through a lens of perfect competition, no externalities, no information asymmetries, no transaction costs, etc. and so end up coming to a faulty conclusion on every major policy question.
"Free" means "lacking from government intervention" or laissez-faire, not "free of charge".
Good or bad, allowing ISPs to set their own rates are prices structures is more laissez-faire than regulating them.