All of your modems and routers run an operating system underneath. If that modem/router/modem+router combo belongs to your ISP, BELIEVE, they have a tap into it.
I know my modem has a couple open ports on it that AT&T uses for remote administration.
So let's answer some questions for you.
What can they see on your network?
Everything that passes through their tunnel, believe they have access to if they want.
Now it would be a gross violation of privacy and ethics if they were doing some type of deep packet inspection on all your traffic but if I had to bet my life on it, I'd bet they were collecting data on every single customer.
This data is likely limited to DNS queries but it could go deeper. They might be collecting the data about the machines on your network but I highly doubt it considering most people have setups like I do. That is, the isp modem is connected to a 3rd party router. So all the modem would see in it's device list would be the router. Pretty useless if you're trying to market to people that have a specific device.
How do they see your machines?
Like I mentioned earlier, these modems and routers run on operating systems and these operating systems have something called an Arp Table in them. The arp table keeps track of known hosts. A known host is anyone that communicates with this machine.
What does the Arp Table have in it?
You'll find that the arp table has
mac address and what interface it's connected to.
Here's a screenshot of my router. I just logged in and dumped the arp table out with
My apologies for redacting so much of it but I don't want my internal network ips and device mac addresses floating around.
So this image is of my router which I own. My modem should only have my router in its arp table so AT&T would only see something along the lines of
Tomato-Router 192.168.1.2 at FF:FF:FF:FF:FF:FF [ether] eth0