said by Skippy25:
Smaller ISP's could still benefit if they had to pay for the caching servers and connection as well.
Can you throw out how you define "smaller ISP's"? I operate an EXTREMELY small ISP, and don't consider my network anywhere close to even being large enough to be considered "small" but even so, it takes a heck of a large network to be able to get any benefit from the servers.
Even if Netflix were to give me the caching server, I need to supply it with a 5 gbps connection in order for it to update the content nightly. In a metro area where you have access to datacenters containing many of the Tier-1 providers, sure, that's no problem. You can do the peering then too.
But for any ISP in rural areas, this is a non-starter. It costs $5,000 a month in my region just to get a 100 mbps fiber connection to backhaul bandwidth from a metro area. The prices per meg go down as you go to gigabit and above, but still that's a hell of a price tag just to feed the caching server, and I consider any ISP big enough to have that much traffic to not be considered "small" anymore. Sure, they may not be giants like VZ, etc, but I consider that to be at least a medium to large provider.