Well like I said it wouldn't require sniffing every single packet. If they want network layer filtering then all they'd have to do is add a few
lines of firewall rules to route traffic destined to known P2P ports to a separate machine for further analysis. AT&T has the advantage of
distributing the load to each individual central office so no one NOC is filtering all the DSL users. They can't technically identify anyone
suspected of transferring copyrighted materials to the cops without a court order, but they can throttle the bandwidth down or send all the user's
http traffic to some Shame On You page.
No question about the ethics. Before the bubble burst and my ISP failed (we weren't big... 14,000 dialup customers, isdn, city-wide wifi, long
distance, hosting and colo) we wouldn't even filter outbound smtp when spam first started becoming a problem. Now tons of ISPs deny all outbound to
port 25. Even that crosses the line in my opinion.
If I understand the legality correctly the only reason companies like AT&T are able to do this is because they provide connectivity over POTS, so the
Cable TV Privacy Act doesn't apply. I'm switching to cablemodem today.

