The relevant argument here -- apart from the piracy question -- is that you cant magically make copies of your internet connection. If you have a 1Mbps uplink, and your friends use 800kbps, then you have only 200kbps left. Which might actually encorage you to upgrade your connection to 10Mbps -- everybody wins! Just like if you by a loaf of bread, the baker won't have any argument with you giving your friend a sandwich.

The counter-argument is that most people who have a network connection home only use a percent or so of it. But maybe then the problem is that they cant get a slower connection cheaper (of course the bursty nature of network connections matter here, but I'll ignore that for simplicity) ...