So, who wants to look at some context for this whole situation...
An interesting comparison would be to look at what another huge content source is doing, say Facebook. According to this article, Facebook is "placing its own servers inside points of presence owned by ISPs to speed to delivery of its content to users". Facebook makes the assertion that they're not trying to form their own CDN but that's really just semantics. A CDN really just describes an entity who houses lots of content and has multiple redundant & distributed connections across the world (so your request for data from Europe doesn't get served from across the world in the US). I suppose if you're not selling the ability to host content on your servers you can say that you're not a CDN, though I think we could just call that a private CDN Facebook is likely just saying they're not making a CDN to avoid upsetting the other CDNs they currently rely on, which they claim they will continue to use as well.
The point of looking at Facebook is that it would appear that ISPs are allowing Facebook to install it's equipment on premise without a large public battle and I would guess at no charge to Facebook because of mutual benefit of reducing inter and intra-network traffic by placing the content closer to the demand. If money is changing hands here it would be interesting to know as it would set a bit of precedent for what Netflix is trying to do, but my guess is it is not.
Now let's look at the future and see why your ISP might treat Netflix differently. ISPs can look in their crystal ball and see a future where all they are is a large, dumb pipe and they're terrified. Most major ISPs make most of their enormous profits from their cable television networks, not that their internet service isn't profitable, but it's much lower margin by comparison. If they had to operate just on their internet service operations, well, they'd likely still keep the lights on, but wall street wouldn't be happy.
If we all had ubiquitous gigabit connections at home, what's to stop some new company from from starting their own "cable tv company" that offers IPTV over the public internet (all the major IPTV systems today operate over the intranet of their respective operators, such as UVerse). Sure, there's content licensing deals and protectionist legal constraints, etc that could be prohibitive, but imagine if my new company, we'll call it IdiotBox, offered television to anyone in the US, and I didn't even have to run a cable, you're already paying for the dumb pipe right? Or even better, what if someone like Dish or DIrecTV who already have established relationships with content providers started restructuring their deals to get IPTV distribution rights. It starts small with just a few channels available online from 'anywhere' and then you fast forward a decade and DirecTV is decommissioning satellites and transitioning to an entirely IPTV company.
If you don't think that's a possibility, go over to the SiriusXM website and tell me how much of that webpage is trying to sell a satellite radio and how much it's just selling you a subscription to an internet-based radio service.
What's an ISP to do to stop this catastrophe... well, dragging it's feet deploying faster internet is one way, datacaps that would make it prohibitive to leave your TV on more than a few hours a day is another, exclusive content licensing deals that prohibit IPTV licensing by competitors, oh and they can try and monetize the content that travels over their networks somehow.
ISP already lost (for now) the battle over Net Neutrality, currently killing any ideas of charging their customers for different tiers of internet. They can't outright block Netflix and charge you $2/mo to get it back. By the same token, this prevents them from charging Netflix directly for that privilege either (don't want your customers to pay $2/mo for access, just pay us $1M/mo and it'll be free for all of them). Comcast tried to do an end-run around this at the inter-connect level by charging the CDN specifically for Netflix traffic. The thing to realize is that these ISPs are desperate to find new revenue streams monetizing the internet content which they know will someday be the only thing they provide.
Similarly, you're seeing ISPs roll out more 'managed services' which are essentially just web services that they market directly to their customers. IP Telephone service, IPTV, even these newfangled commercials I keep seeing for 'connected' home security & automation by Comcast. They're hoping to get people used to buying these addons to their internet connection directly from the ISP rather than just paying the flat $40/mo for the big, dumb pipe.
So, not sure where I was going with this, it's early, I'm delirious from hunger and probably not going to proofread this before hitting submit so I'm sure this post was long and winding with no real point There are too many facets to this that I didn't have a chance to get into, like how those managed IPTV services by Comcast don't count against datacaps, etc. The key takeaway I guess is that your ISP does not want to be a big dumb pipe, but they know it's coming and they need to figure out where that new revenue is coming from. Should they be allowed to charge content providers for the traffic over the connection you pay for already? That's a public policy debate worth having but at least in Round 1 of ISPs v Net Neutrality, the internet won.
If you've ever looked at your cell phone bill and thought, man, I hardly even talk on the phone, why can't I just pay $35/mo for the data connection and get a VOIP app for the few phone calls I make then you can already see where the idea that a big, dumb pipe is where we're headed and your ISP and your wireless provider are going to do everything they can to slow our path there.
Time for football. Go Niners.