It's not "free" though. It's just a switch port to Comcast. It costs Comcast almost nothing. They still have to deliver the content anyway. At the tier 1 level, the Internet has always worked as a "you pay the cost for transferring packets on your own network" basis. It'd be one thing if Comcast was trying to charge L3 for carrying traffic to other networks, but Comcast is trying to extort fees for carrying packets on it's own network to it's own customers. That's messed up.
Comcast's customers already pay AT LEAST $0.18/GB, but it's more around _NINETY CENTS_ a gigabyte, considering most of their customers pay around $45/mo and use less than 50GB of bandwidth per month.
Comcast disagrees on how much that port costs. I haven't done anything close to backbone-y stuff since 1996, but back then, the equivalent port wasn't cheap.
But that's besides the point. I keep asking this question:
Stipulate that L3 isn't actually an ISP in this scenario (whether you agree or not). They're instead an agent for Netflix; they are literally Netflix's outsourced network infrastructure.
If it is the case that Comcast should reasonably be expected to give L3/Netflix a free interconnect...
... then for whom shouldn't that be expected? Why are YC companies paying for bandwidth? Because, as I understand it, they do pay for bandwidth; significantly.
A gigabit ethernet switch port in even the most expensive scenario I can think of would be about $1000. In 1996 it was all FDDI and HSSI ports, which were an order of magnitude more expensive than GigE equipment is these days.
There is very much a precedent for the scenario you describe: Comcast has direct peering agreements with Google. While I can't presume to know if it's settlement-free, I'm almost certain it is. Google's business model, especially YouTube, depends on it.
Your conclusion is a little off kilter. Peering is cheap because they do these types of interconnects in these carrier hotels, and as we all know, running a Cat5 cable through a building is cheap. However, space in these carrier hotels is absurdly expensive because of the demand. This is fine if you just have a few racks of equipment and ship all the packets out over WAN links to your datacenters, which is pretty much the status quo. Not just any average joe is going to be able to setup shop in these places.
YC companies pay for bandwidth because it's cheaper to do that then it is to build out a network. It's the same reason they don't build datacenters, own office space, etc. Most don't even own or operate dedicated servers anymore. Peering works at certain levels of network scale, but below that, somewhat pointless from a business/financial perspective.
Check out SoftLayer's peering page: http://www.softlayer.com/network/peering If peering was as expensive and as uncommon as Comcast claims, why would SoftLayer need a special page for it?
I think it's more about costs than expectations. Peering has high fixed costs (for both sides) — with transit one contract gets you access to the whole Internet but for peering you have to negotiate and configure stuff for each peer. If one content provider is sending gigabits of traffic to one ISP, they can probably both save money by connecting directly. Besides Justin.tv, I don't know of any YC companies that are that large.
Comcast's customers already pay AT LEAST $0.18/GB, but it's more around _NINETY CENTS_ a gigabyte, considering most of their customers pay around $45/mo and use less than 50GB of bandwidth per month.