IF that ultimatum happened, I believe MOST people would refuse, the providers DVR profits would suffer greatly ( a lot more than they would gain from targeted ad fees) and they would have a warehouse full of dusty DVR's.
I think more likely would be to get people to take these with the cameras turned off, and then have promos like "free" showtime for 6 months, IF you let us watch you ("gather data" might sound less voyerish )
Or offering xbox-ish kinect type games for free.
People should outright reject this for hacking reasons (both external and the company (or rogue employees
) "accidently" turning your box on) and the slippery slope this represents, but some will agree without thinking about the long term.