They understand gas, and electric, and water, but for Internet access they seem to think that it is practical, sensible and even right for them to meddle with the industry to nanny and snoop on the public.
It seems that they understand things like electricity supply. It is reasonably obvious and intuitive to most people that the electricity company cannot tell what the electricity is being used for. They can tell it is notably high or low usage maybe, but not that it is used to run a counterfeit printing press or sun lamps for growing dodgy plants, or being used to run a computer that is copying someone else's music.
The clear misunderstanding is that they think "Internet" is somehow different. Because there are packets of information flying around they seem to think that ISPs can somehow tell what is going on and control what is going on.
At the most superficial level, you can. You can see what people are looking up in DNS and see what web sites they fetch. At the moment. To some extent. And, to some extent, you can block and control that. It is superficial at best.
Lots of things on the Internet are already heavily encrypted and more and more will be. Just visiting my on-line bank, my ISP cannot tell anything about what I am doing. I could be laundering money or something illegal, and they cannot tell. There are, already, easy to install and use encrypted distributed communications systems. They are often used for people that need to communicate in countries with oppressive government (which gives a clue as to where this government is going) but also by anyone that wants privacy.
The nature of the Internet is that if you can transport even one type of packet you can do everything and do it in a secure and encrypted way. Ironically, if we still had dial-up modems then video copying would be almost unheard of, yet the government is driving for high speed communications for everyone, practically encouraging the public to copy stuff!
If you take steps to monitor and restrict what people want to do, whether that is copying music or plotting a terrorist attack, and your measures have any success at all, then you just drive the communications more underground. You don't stop things happening. All you do is waste a lot of time and money for ISPs and other organisations. You might even make statistics that say you have succeeded.
(Actually, given that lots of people think the claims made of lost revenues are totally fanciful and in fact people don't have hundreds of millions of pounds stuffed down the sofa just waiting to be spent on legitimate music and videos, maybe this is the answer. If the media industries fooled themselves in to thinking the copying had stopped they could be happy with the warm fuzzy feeling of knowing they are not being ripped off. I dread to think what they would do if they actually did manage to stop copying! We'd have a whole generation not listening to music or telling their mates about the latest track or video, and nobody bothering to buy it... maybe...)
Think of Internet supply as a simple service like electricity supply. You could have the electric companies install meters that monitor electricity in detail, profiling current usage and power factors and so on, allowing a variety of activities to be identified with some degree of certainty. You could then make it that a third party suffering some civil wrong can require the electric company to install these meters and provide details of what they find, and maybe even limit the power usage or cut off the whole household (stopping not just the wrongdoing but legitimate uses of the electricity, and not just for the wrongdoer, but innocent parties in the same house).
Why exactly is that not happening for electricity suppliers? It is just as crazy as what we see from the media industry and even from the government in relation to Internet services.
Now, don't get me wrong. I make software. I am in one of the creative industries. I understand copyright. I have people copy software without permission from me. It is wrong for them to do that. I don't pretend they would have paid me for it though! The key difference is that I have not based my business model on imagining that I have total control of copying. I sell services that use software I write. I sell training courses. I sell support. I sell engraved coasters. I make my business model around what is in fact possible and sensible, not an imaginary magic wand. I also know that if someone did do a civil wrong to me, it would be me that has to take action, via the legal process that has existed for hundreds of years to resolve civil disputes, not to expect third parties to be forced to prop up my business model.
How do we make the government understand this?