Could they physically? Yes. But they'd be screwing over their own customers who rely on that traffic.

Isn’t AT&T screwing their own customers by blocking 1.1.1.1 as well ?

AT&T isn’t blocking 1.1.1.1, just tested it on my uverse connection. As much as I hate AT&T their internet is pretty solid with the exception of datacaps

A more interesting use case though it would have its dangers is them showing a message to AT&T users that their ISP is doing things to damage the internet and that they should call and complain. People got mad at the idea of CloudFlare slowing down network requests by FCC members in protest of their shenanigans.