The feasibility of the technology to do it is there.
There are devices out there that can monitor a "fingerprint" of all media heading through them for copyright enforcement purposes (e.g.
www.audiblemagic.com) and compare it with a record/film company database, there are widely deployed (e.g. BT) devices out there that can monitor a large set of fingerprints at the 2Gbps level for illegal content and anti-virus (e.g.
www.streamshield.com), and there are devices that can monitor and block/rate-limit individual applications, including encrypted P2P clients at the 10Gbps level (e.g.
www.ellacoya.com). That said, none of it is cheap, and people find ways round it.
These vendors (particularly AudibleMagic) and the rights holders are all pushing $$$ at lobbying organisations, here, in the US and in Brussels.
They have had some success (e.g.
http://www.theregister.co.uk/2007/07/23/scarlet_file_sharing_appeal/), and it would surprise me not at all if we move from voluntary self-regulation to compulsory regulation inside a 5-year timeframe, and the three classes of boxes mentioned above start to see greater integration, higher speeds and more brand recogniition.
ISPs (all of them above a certain threshold) have already spent considerable money to comply with the regulations on lawful intercept, and big telecoms providers in a lot of geographies have spent astronomical sums of money on intercept and monitoring for voice and circuit data services (most in ways you don't hear about, but occasionally something like
http://www.dotindia.com/isp/landing_station.doc pops up).
