It is relative reasonable for them to restrict the equipment that terminates their wiring / fiber / radio signals. If only to reduce the cost of supporting low-skill customers with flaky equipment.
Naturally, "God is Greed" ISP PHB's love to use that as an excuse to charge exorbitant rates for piece-o'-sh*t equipment. And other crap.
It would be wonderful if there were governments so technically savvy that they were able to effectively regulate abuses in this area.