As sad as it is, most people won't understand that their device have been effected, and the telcos won't be responsible, financially, for paying to do the cleanup or verification.
I think the solution is probably similar to the sorts of laws that we have for dealing with pollution and similar bad behaviour. Start with warnings and education, escalate to fines and other penalties, and only escalate to outright bans in the worst and most recalcitrant cases.
How about: use IPv6, and cut off just the coffee machine.
You could make a compromise here and require ISPs and network vendors to support a common notification protocol to identify devices sourcing malicious traffic. Most ISPs already have systems in place to send notification messages to customers that are sending botnet traffic. You could mandate it for all of them and let the customer decide if they want their router configured to automatically block a device they were notified about or just record the MAC address and send the ISP a URL the user can visit to view the device sending the traffic. You could make it friendly to the unwashed masses and still put detection on the ISPs and not give them privileged access inside every customer's network.
How?
A couple of years ago I had an email from our ISP telling me that "common port X is open on your router" (forwarded to a box exactly as I set it up) and asking if I could "fix the problem".
Except it wasn't a mistake or a configuration error, I deliberately set it up that way.
Yes?
That’s the only reasonable way to go about it. If you block only single clients you’ll just paint a large bullseye on universities.
Even if you had a central authority cutting off access from ip addresses, do you cut off whole university campuses because someone's "smart" coffee machine is participating in a ddos or entire businesses because there is a computer in a closet somewhere that is infected?