"Why should the Internet be any different than the telephone?"
Because the Internet IS different than the telephone. Telephones are based on loop technology, in which multiple backbone systems (with different protocols and different capabilities) are integrated at the interfaces, by mutual agreement of the providers. The Internet, on the other hand, is a single backbone technology that is implemented across multiple nodes. The telephone systems are controlled by the owners - they can do whatever they wish to do with it. The Internet, on the other hand, is owned by no one, and it is only through the cooperation and good will of the Internet users that it works. It isn't what's best for your bottom line - it's what's best for the overall system performance and integrity.
Breaking the Internet into multiple pieces, as you propose, can do nothing be degrade the overall quality of the Internet, not to much mention facilitate censorship and access control. The individualism that comprises the Internet will be gone - it's only a matter of time until some company, or some country, imposes their technological will on all the Internet users - much as Microsoft was able to do with MS-DOS. "If you want to use our Internet resources, you have to pay for access to our national network."
What you, or I, do on the internet comprises about 10% of the network's use. Financial institutions, governments, corporations, individuals, and other elements use the Internet as a pipeline, i.e., VPN technology, to conduct secure - and inexpensive - communications. You probably aren't even aware that classified information is available at your Internet port - if you knew how to access it. Imagine, if you will, the Chinese refusing other governments the use of their routers - thus disrupting critical communications processes. Imagine, if you will, Israel denying any Internet connectivity from the US to Europe. THAT is the danger of relinquishing management of the Internet.
Now ... as for your proposal to stop all development until we figure out how to protect the data. THAT is how we protect the data - Information security, and information exploitation, is a game of cat-and-mouse. I build a system, protecting against all known vulnerabilities, deploy it, and immediately, hackers try to figure out how to break down the security walls. Then, when they are successful, I have to go back and build patches and fixes, or new systems, to fill the holes. The only way to truly protect your system is to shoot all the hackers - BEFORE they hack.
You're not concerned about the Chinese - you should be. You know, your corporate plan to release a new product that ensure your employment for the next 10 years? The odds are pretty good the Chinese already have the design package ... the automated transfer of your check to the bank every payday? They can turn it off any time they like ... Maybe you missed the incident in 2011 when it was discovered that the Chinese were using over 1,000 US home computers to do calculations for their space program. They had stolen some of your computing power while you were sleeping ---
The NSA program, on the other hand, is currently benign, but is rife with potential for abuse. It needs to be stopped - but, then, you don't get to bitch when terrorists set off a bomb in the middle of Chicago. Life is a series of trade-offs.
