Earlier quoted context omitted.
Degrading video quality is not a bad idea if you have limited bandwidth. This would help in cases such as airplane flights. One person watching HD cat videos is going to consume more bandwidth than 20 people doing work. Now, assuming bandwidth increase is difficult to achieve, they would be forced to keep increasing the price instead. Prioritizing non-video content is challenging if all content is encrypted.
Why not limit the bandwidth per user instead? Youtube itself will auto-adjust quality based on connection speed.
Ideally, there would be a dynamic limit based on network utilization and type of content consumed.