"Does the whole household get cut off when one member illegally fileshares?"
I would imagine the entire connection gets cut-off, because it would be very difficult to allow the household to keep the connection and prevent one person from going online.
i) The government throws its hands in the air and gives up.
ii) The government cuts off the entire building/complex.
iii) The government cuts off people entirely at random.
Knowing the way most governments tend to work, my money is on number 3, with number 2 coming in a distant second.
I would imagine the entire connection gets cut-off, because it would be very difficult to allow the household to keep the connection and prevent one person from going online.