Ottawa's Canadian Internet Policy and Public Interest Clinic (CIPPIC) made a similar argument last year:
"When Rogers modifies the html file in their cache and sends it to its subscribers, it means the Web page has become a derivative work of the original page under copyright,"; McOrmond said. "So if the licence for the particular Web site being modified does not allow for derivative works, Rogers would becomes a pirate. This is a modified work which is considered a worse violation of copyright than verbatim distribution for free."
Don't know how effective that argument would be in court given they're essentially using a frame and no original content is distorted. ISPs might not want to risk a fight with the courts or network neutrality brigades though.