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I am using prepaid broadband plan of Hathaway (in India). Few more days are left for the plan to get expired and I observed the below screenshot.

Random website with a notice from Hathaway in it.

This popup comes only when I visit any non-secure website (without https in their website's URL).

How do the ISP do this?

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    your every single request runs through their servers, and if it is http, then the content (request and response) are there basically plain text. they can simply inject the markup for this into the data stream.
    – Thomas
    Commented Mar 23, 2019 at 18:16

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The official name for this process is called man in the middle. This is usually used by hackers trying to extract data but, as seen here can be used in non-harmful ways as well.

Basic Diagram:

(INTERNET)=>(ISP)=>(YOU)

Explanation: Since the ISP is in the middle of you and the internet it can inject extra data into network packets.

The reason it doesn't work for HTTPS: HTTPS is an SSL wrapper for HTTP so the ISP can't inject any HTML because the HTTPS packet is encrypted and to inject data into an SSL packet you would need to decrypt, inject and then re-encrypt the packet with the modified data enclosed.

PS: And yes, your isp can read ANY HTTP(plain text) traffic.

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