said by mdurkin :

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It's not that simple. There are legitimate reasons why a provider receiving more traffic on an interconnection like AOL apparently is would want settlements. With the typical hot-potato routing, Cogent would be pushing their outbound traffic destined for AOL out the nearest peering connection, and AOL would be hauling that traffic across the country in many cases. It's difficult to exchange enough detail with BGP so that Cogent could know where AOL's destination customer is located to move the traffic closer; if they get it wrong then they can wind up moving traffic from Cogent in San Francisco to Chicago only for it to be delivered to an AOL customer in San Francisco. Hot potato gives the packets to the ISP best positioned to know where their own customer is as soon as possible and route it most efficiently, but it means the receiving ISP tends to move the packets farther. This is the same reason why many large ISPs will not peer with other ISPs unless they meet them at at least 3-5 peering points in several diverse geographic locations around the country.

The other major factor is the simple fact that ISPs can get more money from web hosting customers than they can from access customers--in this situation, AOL is the access provider and Cogent is the hoster. Not withstanding the fact that Cogent is flat-rate (and don't forget that Cogent's own customer contracts have requirements that customers maintain no worse than certain ratios of outbound:inbound traffic), AOL and most other ISPs likely get more revenue per Mbps from hosting customers than from access customers.

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