This is just a big game!
Whatever the facts of the matter or the theoretical legal arguments, this is a game of publicity poker being played out by the BPI and co. The music industry want a bit of noise made about all this downloading going on (where they *perceive* lost revenue). In the UK, having seen the failure to win the battle (and the hearts and minds campaign) through litigation of individual users in the US, the industry now have the ISPs in their sights as a vehicle for enforcement. They have a stick and a carrot:
The stick is the fact that they have lobbyed the govt into threatening to legislate on the matter - this has been enough to bring the ISPs to the table.
The carrot is to offer the ISPs a slice of that big content cake (TBH it's probably fairly attractive to them) hence, for example, the other story today about legal subscription-based p2p services.
The two sides are now in the throes of establishing a model that puts the shits up enough lusers to herd them in the direction of the new subscription services that will be offered and reduce the 'pirate' constituency to a small hardcore.
Can this happen? Well, most downloaders are probably not clued up enough to see past the empty (?) threats or take their activities underground (YKWIM?). After all, if there's 6m downloaders, how many do you think are tech savvy enough? The only caveat to this is that a p2p/BT client that hides IPs may emerge and escalate the tech battle to a new level.
IMHO this approach may bear some fruit simply by bringing some real pressure to bear on Joe Public. There has to be a pay-off somewhere between making it harder/riskier to download copyrighted content and providing easily accessible subscription music services and I think this is what they are banking on. Hopefully, even if this comes to pass, there comes a point where the BPI can claim a face-saving victory - and leave the remaining hardcore contingent to their own devices.