Re: very appealing for a small ISP.
"Might not be appealing, but does it provide the service you promised to your customer? I'm paying my ISP for the connectivity, not Netflix.
If the ISP wants to modify our contract to include a Netflix peering surcharge, because the cost of that connection is disproportionate to the rest of the service (use whatever method of determining typical non-Netflix user you want) that's fine and I'll evaluate the value of that new contract."
Exactly! I have sympathy for the ISPs, but the way the model is structured, it isn't Netflix pushing lots of data into ISPs, it's the ISP customers requesting/pulling/downloading the data as allowed under the terms of their contract.
If an ISP no longer finds the 'all you can eat' (but hopefully not many of you will) model sustainable, then they need to reevaluate that model. Whether it's to place restrictions, up the prices generally, or charge more for higher usage (and it should be based on the data amount, not who's supplying it) then so be it.
As it is, they are charging customers for the right to download that data, and then when they do, they want to charge the provider of that data too.
Yeah, I can see how as Netflix gets popular it seriously impacts on your business model, but that's not Netflixs fault for supplying data your users have paid to be able to receive. The flaw is your underselling, and it's only your problem.
You'd have the same problem if all your users simply downloaded the same amount of data from loads of other random sites.. You going to try and charge every site for the data your users download from it?
P.S. I'm referring to the basic bandwidth issue - the CDN/cache/local server/hosting aspect is another big can of worms