What you're recommending won't be very effective or useful:
I am not recommending: this is how Internet works here in Brazil. I have 15Mb/s down and 2Mb/s up at home. It is extremely rare to see it goes down more than 30% of the sold speed.
1. ISPs do not offer real Quality of Service guarantees because punters don't want to pay for it. Your recommendation would dramatically raise rates.
Wrong. QoS is just a guarantee. I can sell QoS of 80% nominal speed. If it is on the contract is valid. What would be extremely costly would be to guarantee 100% of the speed, with a SLA of 99,99%. What we have if 80% of the nominal speed, during at least 60% of the time. A far cry from 100%% with 99,99%.
2. Requiring network capacity to support the 60-80% usage mark for all users would require a huge amount of unused capacity sitting around, so there's a really idiotic amount of waste incurred that no ISP can afford to provide.
But they can. They just don't want to. Time and again I see this in the real world. When the ISPs needed to provide only 20% of the nominal speed there was one that would do only this - and barely (its name was OI). There was another one that would give me ALWAYS 100% of the plan. Sure, the guarantee was only 20% - but I ALWAYS got 100%. Did a download of 160GiB (took me days), and the router's MRTG was a flat line - at 100%% speed.
3. ISPs cannot and will not offer QoS guarantees for other ISPs, i.e. they can't ensure that some other ISP won't introduce packet loss that makes your connection suffer.
They don't have to. They have to guarantee the band until its borders routers.
4. Service levels really don't just depend on local loop utilization. Given all the various L4 connections make between systems, it's certainly very difficult to ensure some sort of uniform performance guarantee with only one component of many in the end-to-end connectivity that exists with the Internet.
No one said that. The ISP only responds for its own network. Anything different would be insane.
Network capacity planning is complex, but exponentially so when you have so many individual ISPs all interconnected to provide "Internet" services. Trying to regulate a minimum performance level with such random, aggregated connections is virtually impossible, since no single person understands all of the connectivity end-to-end.
The regulation applies only inside the ISPs borders. No one is talking about anything beyond that.