ISPs don't want to cut off their income here. I'm certain they have a very good idea of how many of their customers, especially those paying for higher tier plans, are either getting constant DMCA requests, or have a persistent connection to a VPN service. They have a good idea of how much money they're making from people pirating content, so this position for them is hardly surprising.
At the same time, I'd rather they fight with the copyright trolls than me. Regardless of the reason for why they're doing it, it's a good thing to fight for.
IMO, they shouldn't be responsible for this because they're not tasked with enforcing laws. They must abide by them, and they have a legal, or at least, moral obligation to report any felonies/crimes that they're aware of (with varying degrees of obligation depending on the severity of the crime. Eg, I'm less bothered if they don't report, say, piracy, than I would be if they don't report CP/murder/violent crimes, etc).
If the LEO's want a service cut off for a good reason, then let them get a court order for it. They should not be obligated by law to enforce such laws. Any enforcement should be handled by an independent organization, and be filtered through the court system as a check/balance for the whole cabal. They shouldn't be forced to both find and enforce infractions. Reporting suspected infractions, maybe. Forwarding legal requests to customers, sure (like DMCA notices). Oblige disconnect requests from law enforcement by request (when confirmed necessary by courts in the presence of reasonable evidence), absolutely.
But having the ISPs do all that themselves with little oversight, is both a danger to their clients, to their liability, and to the public at large, mainly in the context of free speech. The ISP is just the middle man, the messenger. They don't host the content, nor should they police it, or the access you can get to it. I'm all for collaboration in the interest of enforcing the law, but putting the entire obligation on the ISP seems foolish to me.
Cyber crimes is one area of law enforcement that I don't think should be defunded. It may be that ACAB, but those doing the investigative work, away from public interaction (and possible abuse), are not the root of the problem there.
I'm not sure how real companies handle this, but I can share what we did in a student organization at my university that provided internet to its members.
Not only could we monitor who was downloading a lot of data, but we also received emails from legal organizations informing us that a specific IP in our network(All members had a public IP) had downloaded copyrighted content. They would ask us to disconnect that user. These emails typically came with an XML file attached, filled with legal information and details about the content being downloaded, often including the exact torrent filename.
We built a system that would automatically parse the XML and forward the email to the user responsible.
The subject line may or may not have been "Use a VPN, you idiot!" at some point.
We also maintained a "high score" list to track what was trending. The last time I checked, Rick and Morty was in the top 3, but that was a while ago.