The Rest of the Story
I am the independent ISP mentioned in the article. Some of the comments above have been unkind or misleading; I'll try to correct these and add some more information that was not included in the article here. Note that we are a small, hard working local company undertaking a difficult task for our users despite attempts by corporate giants thousands of times our size to crush us, so please save the ISP-bashing for your monopoly telephone or cable company.
1. Netflix' "OpenConnect" appliances are not caches. They are hosted servers, which Netflix wants ISPs to host, for free, exclusively for Netflix. (So much for any pretense of "neutrality.") Every day, Netflix loads terabytes (that's not an exaggeration) of content into the server -- including multiple copies of every movie, in different formats -- and expects the ISP to provide the bandwidth for this for free, even though most of it will never be viewed. This saves Netflix money on CDN charges, but actually costs the ISP quite a bit. The $10,000/month bandwidth cost mentioned in the article is not an exaggeration; it is what backbone provider Level3 just quoted us for a "gig wave" (a gigabit of fiber optic bandwidth to an Internet hub).
2. The Netflix appliances are also power hungry and consume rack space, air conditioning, and other expensive resources which ISPs are in the business of providing for a fee. But Netflix wants to leverage its market power to obtain all of these things for free. Verizon and Comcast have said "no" and have gotten Netflix to pay a fair price for their services; small ISPs have gotten nowhere (not even the same amount per subscriber, even though rural ISPs have higher costs per subscriber). We think it's fair that small ISPs be paid at least the same amount per subscriber (after all, our Netflix subscribers ought to be as valuable to Netflix as Comcast's and certainly deserve the same consideration from them) to cover bandwidth, rack space, and/or equipment to improve Netflix performance.
2. Transparent caching of Netflix content would be easy to achieve without compromising the content creators' intellectual property. All that is necessary is for the content to be encrypted, with the key sent to the player via a separate secure channel. Then, the cache itself could not be used for piracy. The player, of course, still could -- but this would be true with or without caching.
3. To ask the ISP to cover all the costs of connecting to Netflix and enhancing its performance is (a) asking the ISP to favor one content provider over another; (b) asking non-Netflix customers to subsidize Netflix customers; and (c) asking the ISP to subsdize Netflix. None of these things are fair or reasonable.
Our ISP does provide the amount of bandwidth we promise between the user and the nearest Internet peering point. That is what users pay us to do and what we are obliged to do. We do it as best we can, and at the best price we can offer, despite the high cost of serving a rural area. Most of our customers say we do it better than the monopoly telephone and cable companies in our area (we offer demonstrably lower latency and jitter), and many folks in town have switched to us from them. But Netflix apparently has performance problems even on a high quality connection if it does not go directly to a Netflix server.
Netflix is asking us to give it preferential treatment, asking us to give it services for free, wasting expensive resources, and refusing to allow us to simply implement an efficient LRU cache for Netflix AND other content (something that would cost us a bit of money, but would at least be provider-neutral; it would thus be fair to ask all of our subscribers to pay for it).
We, on the other hand, are asking for only two things which we think are fair and reasonable. The first is that Netflix not squander bandwidth, which is costly here, by allowing efficient caching of its content in a way that does not compromise intellectual property. The second is that it provide the same subsidy for each of our Netflix users that is already providing to improve service to its customers on Comcast and Verizon. We won't pocket the money; we'll spend it to improve performance, and we're willing to sign a contract that stipulates this.
Netflix -- a billion dollar company -- is trying to leverage its market power against us. I think you'll agree that that this is not fair, reasonable, or in any way "neutral."