[pedrocr]

> Why is it ok for Netflix to pay a transit company, but not Comcast?

Because transit providers are actually providing a service to Netflix. They allow them to dump all the traffic in one location and then the transit provider will build out a network to take care of moving the traffic to anywhere in the globe where there's an ISP requesting it. The transit provider will then not pay the ISP to take the traffic and deliver it to their requesting user. When Netflix connects directly to Comcast that's not what's happening, Netflix has to get the content to Comcast's network by itself and the Comcast network is already paid for by the user. So if Netflix pays Comcast then Comcast is getting paid to create the network by both the user and Netflix.

[jdmichal]

> The transit provider will then not pay the ISP to take the traffic and deliver it to their requesting user.

The "not pay" part is, I assume, based on the prevalent use of settlement-free peering in the industry. These agreements were based on a understanding that, over time, the traffic would wash out even between the two, so let's just not keep track and call it even from the start. This is not necessarily a given in all situations. Comcast asserted that the quantity of Netflix traffic was breaking this understanding.

[pedrocr]

>These agreements were based on a understanding that, over time, the traffic would wash out even between the two, so let's just not keep track and call it even from the start.

I don't think that's the case. Transit providers will always tend to deliver more traffic to the ISP than the ISP delivers to them, because users download more than they upload. That's still fine because the transit provider's network is paid for by the content provider and the ISPs network is paid for by the user so the settlement free peering always makes sense. Without it the ISP wouldn't have content so no users and the transit provider wouldn't be able to deliver traffic so would have no clients. The fact that Netflix is now a significant single content provider in the transit network doesn't change this dynamic at all, it just makes it easier for ISPs to squeeze them for money. Compensation for unbalanced peering only makes sense between transit providers since for each connection only one of them is being compensated (the one whose client sent the traffic) so the other one will only accept that peering if it is balanced.

I've explained this more clearly elsewhere in the thread:

https://news.ycombinator.com/item?id=9264734