And it's much harder now to have a caching server because everything is HTTPS, so you have to coordinate with both ends to make it work.
But Netflix was running at full HD with no problem. So they must have had local cache's with the ISPs.
source: I used to work at Akamai (it was a while ago). The myriad things they do with their edge servers is pretty amazing, but for simple CDN stuff, most of the time clients aren't shipping hardware to isps. That being said, if Netflix can convince an isp to pay its electricity and hardware maintenance costs for a popular isp's customers that's going to pay for itself very quickly. So, i can see why Netflix offers this. It's just not normal AFAIK.