Craven Irish ISP caves in to music industry

Ars Technica reports (Record industry talks Irish ISP into blocking P2P sites) that the largest Irish ISP, Eircom, has agreed to start blocking access to filesharing sites, beginning (of course) with PirateBay.

Ireland's largest ISP, Eircom, has entered into an agreement with IRMA, saying that it will begin blocking access to sites that allow users to swap files and that it will not oppose any court action mandating that such action must be taken.

Eircom entered into the agreement with the recording industry due to a recently-settled lawsuit over filesharing. The suit originated when the Irish branches of EMI, Warner, Universal, and Sony charged Eircom with aiding and abetting piracy by doing things like advertising its services on The Pirate Bay. As part of the settlement, Eircom agreed to implement a full "graduated response" program (also known as the "three strikes" rule that disconnects repeat file sharers after their third offense).

However, another part of the settlement apparently has Eircom going along with whatever the record labels ask, as it can't oppose any court action taken by the labels in the future.

Rather than devising novel business methods, it would seem that blanket shutdown of sections of the internet is the only strategy that IRMA can propose.

Additionally, IRMA has apparently sent threatening letters to other Irish ISPs.  It all makes me wonder if it's in any way linked to U2's record company's cockup that released the new album onto the internet before it has even been released.

More to the point however - how does this impact on legitimate file sharing activity?