The recent case in Australia of Roadshow Films Pty Ltd v iiNet Ltd (No.3) brings into focus the challenges of policing the internet and the challenges involved in the forthcoming Digital Economy Bill.Basically the Australian Federation Against Copyright Theft had notified iiNet that their subscribers had been repeatedly illegally downloading Hollywood movies using illegal sites and iiNet had taken no steps to prevent this. iiNet were successfull in arguing that they had safe harbour as they had not "authorised" this infringement. Clearly they were aware of the infringement but had not authorised it.
From a commercial perspective the rights holders and their representatives realise that it is very difficult to chase down hundreds of individuals and would much rather go after a corporation who might be able to pay damages (and legal fees) such as an ISP. From the ISP's perspective they don't really want the overhead of shutting down users and also the lost revenue........cutting off your own customers is never appealing.
Someone is going to have to pay for an anti-piracy service to avoid meltdown in this area but the tough question is who ? The content owners have the most to lose so they should pay something but at the same time there needs to be the ability to shut down the internet connections of repeat offenders as well as remove the ability of the pirates to make money via AdSense.
Policing Piracy is a cost to all in the internet value chain that is not going away - the difficult question is how to fairly allocate that cost.