Major ISPs don't really have bandwidth costs, more like physical maintenance and equipment costs. Either way, scaling up the core network is a trivial cost to them. What costs is the infamous "last mile" but that isn't really the problem here. A major ISP could do this by eating the rack and power cost of installing the Netflix equipment in each of their data centers. While yes this costs real money, most is already sunk costs and adds only trivial incremental costs.
Now Netflix could just push out 1080p to everyone but given that they use L3 to push their content out to the "edge of the network" it would cost them a good bit. BTW, L3 does what Netflix does and has major ISPs give them rack, power and port space in their data centers. While I don't know the arrangements they have, this is typically done at trivial cost to either side because it benefits both. L3 and Akamai just do it on a more generic basis and it's part of their core business so they have more leverage than Netflix does.
To go back to the last mile, 720p typically takes 3-6mbits/sec on my online streaming services. 1080p takes 6-12mbits/sec. I think Blue-Ray has a max cap of 40mb/sec to give you a rough idea how much extra these streams are compressed. As long as you connection can handle it there is no reason you can't stream it.