Ars Technica writes Netflix packets being dropped every day because Verizon wants more money. This framing of the issue makes the most sense to me on the Netflix/Verizon issue.
"First, some background. Cogent is an Internet bandwidth provider that sells transit to Netflix and other companies. When Netflix purchases transit from Cogent, Cogent is responsible for distributing the traffic to all corners of the Internet. But no single company controls the entire Internet. Thus, Cogent must exchange traffic with other network providers, including Verizon.
The connections between Cogent and Verizon take the form of peering. It is a point-to-point connection that doesn't necessarily guarantee passage of traffic to any networks beyond the two involved in the deal. Peering generally happens without any money changing hands, particularly if the two companies involved are of similar size and influence."
"Verizon wants to ditch the "settlement-free" peering model and get money from Cogent, arguing that it has to accept far more traffic from Cogent than vice versa because of high-bandwidth applications like Netflix."
"Verizon Senior VP of Public Policy Craig Silliman spoke to Ars today, saying that Cogent is unique in taking such an inflexible stance in negotiations.
There is a wide range of Internet interconnection agreements, he said. "We have settlement-free agreements. There are some ISPs to whom we pay money and there are others who pay money to us," Silliman said. "There is a whole range of commercial options, and they get worked out commercially and smoothly, except for this one ISP who seems to have problems with not just us but a lot of others."
Silliman added that "the whole premise of settlement-free peering is that you have a roughly equal exchange of traffic." He did not say whether any of Netflix's transit providers have agreed to pay Verizon, noting that specific commercial arrangements are confidential.
He also did not reveal how much money Verizon is asking for, saying, "we are open to negotiation for a commercially reasonable solution that works for both parties.""