In the idea, each user gets a connection, this connection goes back to the CO. This can be done for about 3% over the cost of a shared connection, so don't spout BS about shared vs dedicated, because dedicated is nearly the same price.
At the CO, the customer plugs into a chassis. This chassis has enough back-plane and uplink to support all users running at 100% at the same time. Then the chassis plugs into the trunk. Up to this point, there is no over-subscription, but that's because it's still relatively cheap. The trunk is where over-subscription becomes important for waste reasons.
At the trunk level, typical user usage is 20:1. This means 19 out of 20 users, on average, are not using their connection at any given time. This is a fairly reliable metric. This means you can run dedicated bandwidth from the trunk to the customers, but the trunk only needs 1/20th of the bandwidth.
An example of making this work would be something like this. Say you have 100 customers with 100mb connections. Each user gets a dedicated connection to the trunk. Each customer pays $100/month. Then the ISP only purchases enough bandwidth for 1/20th of those users to use their full connections at the same time, so 500mb.
The ISP only pays $1/mbit for 500mb, so they pay $500 for 500mb. But they can sell that to 20x the users at $100/month for $10,000 of revenue. Each customer effectively gets 100mb every time they use their connection, but the ISP only needs to provide 1/20th of that on average.
Some of that $100 goes back to supporting the connection to the customer, so carve out $30 of that $100 bill for that. This leaves $70/customer as revenue towards transit bandwidth. That is $7,000 in revenue for $500 in costs, so about $6,500 in gross profit.
You ask, "but what if someone uses their connection 24/7, like bit torrent?"
That's the pain of averages. In a small population, you may not get the average, but in a large population, you should. If you're a large ISP with 50,000 customers in the city, that 20:1 ratio should be quite reliable.