In addition to the http cache control header there are also last modified and expires headers which are used to manage caching. Any good solution will inspect these also to see if it's beneficial to cache.
Batmann, when you load the twitter.com home page your browser does about 15 http requests, one to load the html and the rest to load the images, css, javascript etc etc. The static stuff that doesn't change very often will have headers set to enable caching. The html part is not usually cached by any sensible solution because it's dynamic and small anyway.
Jarno: The whole "ISPs have common carrier status" thing is a myth. And caching by an ISP is explicitly allowed under the copyright law under section 92E.
A myth? Strange because it's written about in a lot of legal papers and places like computer world. Here's an example from the Open Polytechnic of New Zealand which mentions it.
The only place where the words "common carrier" appear is in the Carriage of Goods act, where the term is deprecated, and only applies to physical goods. The paper you linked to expresses a wish for ISPs to be given similar protections, not that they have it.
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