This is where people don’t realize that VPN’s get around ISP for one big reason: they are not allowed go stop you at this time. That can change in the future. It’s easier to implement than you think: All traffic has to get filtered through some network device at the ISP level (most commonly called the gateway). They will do one of two things:
1. Demand that traffic be sent unencrypted so they can read everything at the gateway. This has serious issues since HTTPS using encryption and makes major issues with how things such as banking get done. Or 2. Utilize a classification system with the ISP devices with a default “block” rule. Unless the traffic is going to a known “good” service/IP the traffic automatically gets blocked. This is how firewalls today work - implicit deny with only certain previously filtered categorized or sites allowed through. This is likely how countries such as North Korea handle it.

Number 2 is the most likely scenario as it’s the easiest to deploy and doesn’t require cooperation from anyone but the ISP (which would easily get persuaded) What will happen after time is that they will hunt down most services and terminate their entrance nodes. A small handful will likely get smuggled into service somehow, some way (admins can be sloppy with clean up). Those small handful will become invaluable for people with live OS systems using a purely public internet connection with a device that they bought without an electronic payment form (to avoid mapping MAC addresses to someones credit card).

Yes, these kinds of systems can be defeated with some know how, but not by the general public. Unless you use your own dark network, there is no way around scenario 2. Once your traffic leaves your device it can get filtered.

If they implement this there will be zero privacy online (not that there really as any more anyway).