[exelius]

Large ISPs sure as hell don't do this (maybe they used to; but not in the last 3 years). They have dedicated cages in their datacenters for external gear that sit at the edge of their network.

Regardless, the word on the Netflix-Comcast situation is that Netflix is indeed hosting the hardware at 3rd party datacenters with a dedicated connection to Comcast. Whether you call it an interconnect or private peering is just semantics; it's a pretty common practice in the industry and technologically, it's no different than having a 10gig fiber link within a datacenter.