if enough customers of the ISP do this, they will no longer charge a flat rate. It's just that some people manage to consume resources that other customers don't atm.

My ISP situation is olipolistic (and perhaps a colluding duopoly once you distill it down enough).

I’m confident it’s not an efficient market and they’re charging what the market can bare, not a tight markup over their actual costs.

Don't most ISPs have a bandwidth cap?

Not in EU.