Legal peer-to-peer torpedoed by majors

For quite a while now, there have been mutterings that a high-level UK ISP was about to offer a broadband product which monetised peer-to-peer sharing. If it's not been quite the Holy Grail, the idea has been sought like it was some other cup that Jesus might have used at some point.

And Virgin - the cable-operating business - was about to offer one. But now the plans have been axed:

However, 11th hour "anti-piracy" demands by major record labels including Universal Music and Sony Music meant Virgin could no longer launch the service as it had envisaged. Labels demanded that Virgin block uploads and downloads of songs from subscribers' PCs, sources suggest. Since the system is designed to encourage file sharing, the demand removed the service's USP.

Yes, it would rather, wouldn't it?

In effect, then, the conversation would have gone something like this:

Music industry: We are worried that people are using peer-to-peer networks to take music without paying for it
Virgin: We have technology that can track what people are sharing; if you like, we could charge people a fee for peer-to-peer sharing, and reward you and your artists for activity that would otherwise happen anyway, but without you getting any money
Music industry: That's brilliant. Make it so.
Virgin: Right, here we go then...
Music industry: Hang on a moment, though - could you just make a small tweak to stop people doing the uploading and downloading bit?
Virgin: You mean you want us to launch a service that legalises uploading and downloading, and makes sure everyone gets compensated - but without the ability to upload or download?
Music industry: Yes, that's it.

It's like watching people trying to put out a fire, but refusing to put down their buckets of petrol while they do so, isn't it?