It's interesting from a bit of a game theory standpoint. The optimum outcome might be achieved if Netflix hands over the appliance and the ISP installs and keeps it running at no cost to either party, except for maintenance costs (hardware replacement, etc.) which Netflix bears. Both parties save.

If Netflix wanted to get clever, they could calculate the cost an ISP would likely pay for the bandwidth their users consume, and charge the ISP say 40% of this amount to host the appliance. Netflix saves 100% of its third party CDN bandwidth costs for that ISP and the ISP saves 60% of their peering bandwidth costs.

If the ISP wanted to get clever, they could calculate the bandwidth that Netflix is paying a third party CDN for the traffic consumed, and offer to host the appliance for 40% of this amount. The ISP saves 100% of its peering bandwidth costs for Netflix traffic and Netflix saves 60% of their CDN cost.

What's likely to happen is a bit of cat and mouse over the costs. The ISP peering is likely a lot cheaper than Netflix's CDN costs, so this could work out as:

    Netflix CDN cost
  - ISP peering cost
    ----------------
  = Cost to Netflix

This is all pure speculation with made-up percentages, of course.