Earlier quoted context omitted.
> The basic problem is that a linear increase in bandwidth for the customer results in an exponential increase in costs for the ISP > N * (N - 1) =~ N^2 (assuming full duplex links, which would be generally correct for the internet) 1) N^2 is not exponential, it's polynomial. 2) Expanding capacity isn't even N^2, it's just linear. If you double each residential customer's bandwidth, you "only" have to double the capa…
> Because just giving everybody a connection which is twice as fast doesn't mean everybody is going to immediately double their usage. My understanding is that peak load is the issue, not total data transferred in a month. If Netflix downloads/buffers video content as fast as it can, and people mostly use Netflix at the same time of day, then giving them more bandwidth is a potentially big problem
The argument they might make is that their services keep the data closer to the users, but that's such a cop out. They could do the same thing for Netflix with transparent proxies if they wanted to (but the result would be to make Netflix more usable instead of less, which is adverse to their interests as competitors). And in any event the uplink to a large peer is a totally inconsequential part of the cost of operating a network. The thing which is expensive is upgrading the last mile to handle a large amount of video traffic, but that cost is the same whether the traffic is Netflix or FiOS TV.