What Can Our ISP Do To Manage Network Traffic

Our ISP says they don’t have the right to prioritize the user applications according to the type of application running on the network. The problem is that about 80% of the users are interactive web applications with the remainder a mix of large file downloads and multi-location access programs like BitTorrent. The problem is that the 20% are killing the performance of the 80%. My question is:

1. Does an ISP have the right to do this?
2. How much function is available in a typical network management tool to prioritize these different applications? The router managing the network is a Cisco router. There are around fifty users on the wireless network with probably a max of ten to twenty users on at a time.

Jack