It's interesting from a bit of a game theory standpoint. The optimum outcome might be achieved if Netflix hands over the appliance and the ISP installs and keeps it running at no cost to either party, except for maintenance costs (hardware replacement, etc.) which Netflix bears. Both parties save.
If Netflix wanted to get clever, they could calculate the cost an ISP would likely pay for the bandwidth their users consume, and charge the ISP say 40% of this amount to host the appliance. Netflix saves 100% of its third party CDN bandwidth costs for that ISP and the ISP saves 60% of their peering bandwidth costs.
If the ISP wanted to get clever, they could calculate the bandwidth that Netflix is paying a third party CDN for the traffic consumed, and offer to host the appliance for 40% of this amount. The ISP saves 100% of its peering bandwidth costs for Netflix traffic and Netflix saves 60% of their CDN cost.
What's likely to happen is a bit of cat and mouse over the costs. The ISP peering is likely a lot cheaper than Netflix's CDN costs, so this could work out as:
comcast is actually charging people more than transit rates to get access to their network -- which is why (except for level3, who has a special deal) video on comcast sucks even with large comcast pipes.
Actually, no, Comcast's paid peering costs are significantly cheaper than all but the lowest quality transit. In other words, if you just have Cogent, you get what you pay for.
That may be true at the 10G level (which I didn't price), but isn't true (in my experience) at 1G. Plus, it's a lot more likely that you'd want 10G of transit and 1G of comcast than 1G transit/10G comcast, so per-G, your decent quality (Level(3), nLayer, etc.) transit is going to be cheaper. Comcast also seems to negotiate less, since they're effectively a monopoly on routes to themselves, vs. transit.
(Obviously the right thing to do is grow to needing 10G of comcast and 50-100G of transit...)
If Netflix wanted to get clever, they could calculate the cost an ISP would likely pay for the bandwidth their users consume, and charge the ISP say 40% of this amount to host the appliance. Netflix saves 100% of its third party CDN bandwidth costs for that ISP and the ISP saves 60% of their peering bandwidth costs.
If the ISP wanted to get clever, they could calculate the bandwidth that Netflix is paying a third party CDN for the traffic consumed, and offer to host the appliance for 40% of this amount. The ISP saves 100% of its peering bandwidth costs for Netflix traffic and Netflix saves 60% of their CDN cost.
What's likely to happen is a bit of cat and mouse over the costs. The ISP peering is likely a lot cheaper than Netflix's CDN costs, so this could work out as:
This is all pure speculation with made-up percentages, of course.