This question gets asked a lot and is often discussed by people in the ISP crowd (see today's Slashdot post). It's an especially critical question for small to medium sized ISPs who are struggling with profitability and continued investment in infrastructure to meet with the changing needs of today's technology.
Many people like to talk about pay per usage models (aka pay as you go), or systems that bill on the 95th percentile bandwidth model. But none of these answer the question adequately. In fact, most of these ideas seem to stem from the user's perspective that ISPs should be "more fair", which unfortunately is never going to happen in today's ultra competitive economy.
Is a business model just an idea or an alternative revenue stream? No. It is a fully thought out process with cash flow analysis, profitability estimates, scalability, SWOT, competitive analysis, labor plan, marketing and advertising plan, brand development etc. It's easy to say: DO X and you'll make money. The fact is, very few people actually think through the entire process very well, or even have the knowledge required to create a "business plan", never mind execute one. So the answer is in the question. If a company hasn't thought out their core business plan well enough, then they probably don't know enough about the dynamics of the industry to begin with. It happens all the time, and this catalyzes a lot of low and middle tier consolidation by large players.
But I'll bite. Since I know from direct experience that the ISP business is volatile, hyper-competitive, has high barriers to entry and has an enormous up front investment in infrastructure, here's what an ISP could do to increase profits:
Step 1) Invest in content networks. Learn from the biggest, baddest 300lb gorilla in the business. AOL. Even if they weren't there as an example, you can listen to this lesson and listen to it well: ISPs have no intrinsic value on their own. Their only real value is being the bridge between eyeballs, eardrums and content. The real value is in the content, not the delivery mechanism (i.e. ISP), which can be replaced by other delivery mechanisms. Content producers will find a way to reach eyeballs and eardrums and will force the innovation of new delivery mechanisms. Virgin Mobile is a gateway to Virgin Entertainment content. They have their WAP access restricted to Virgin Mobile content pages and Virgin Mobile ringtones and everything else Virgin Mobile. So is almost every other mobile provider. They learned this lesson a long time ago. What makes our capitalist society go 'round? Sales. Sales of content, sales of advertising, sales of merchandise. How can you capture people's attention long enough to present them with a product they might like? Content.
So go out and create a joint venture or rev share with an online media company. Use that captive audience you have at your disposal and give them what they want: good content. Provide them with a slick social networking portal with news, events, blogs, and everything else they are accustomed to finding online. At least try.
Step 2) See step 1. Repeat as needed.
Step 3) Read "On Reading McLuhan" - learn what the medium is, and learn what the message is. It will help you figure it all out.