What, exactly, is "illegal" traffic on a P2P network and how is an ISP supposed to identify it? Believe it or not, using Kazaa or Grokster is not illegal; it is when a user trades copyright-protected content without a license on those networks that the actions become illegal.

For an ISP to block illegal traffic and not interfere with legitimate file-sharing, it would need a complicated and error-prone filter, a suitable implementation of which does not currently exist.