Looking past privacy issues, the problem is that if they're taking money through some previously unheard of system, then who gets it?
I'd bet my life that some vile organization like the RIAA just eats it all in the name of "recouping the cost of piracy," and artists never see a penny of it.
Just look at the wording of the article:
"Bermeister, ISPs, and the music industry are all enthused about the potential widespread implementation of Copyrouter."
Bernmeister makes money. The ISPs may make money, and get the RIAA off their backs. The music industry makes money.
But as always, that does not include the artists, and they will be left out completely. This isn't something covered in record label contracts, and even in the event that it works the same as iTunes, where artists make a whopping few cents per song, it's still a crock of s*** to assert that this solves the issue of "theft."
The real problem all along has been that artists don't get paid by record labels, as they're always finding more ways to wriggle their way out of it. This is just another one.
They make it sound like a perfect system, but it's left wide open to abuse. It's not as if every musician on the planet is clamoring for something like this. It's the suits and ties that are rich enough from screwing the artists with questionable contract clauses as it is.
People will never stop downloading, specifically with the intention of avoiding paying for it, so long as that is the case.