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Isn't "preferential caching" just Netflix providing a caching server for free to the ISP? Is this that different from Netflix building more CDN servers worldwide? It is Netflix paying in either case without exploiting their monopoly powers.

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Clearly not a pro but I think it comes down to who Netflix is paying, or even helping out. Because they gave Nextlight a free caching server, any competitor who can't afford to do the same now has decreased performance.

That is an interesting way of looking at things. Netflix adding a cache has absolutely no impact on what any competitor does, or the quality of their service. It will function precisely the same the day before and the day after a Netflix cache is installed.

Actually at the very large ISP I worked at customers saw better performance because the back haul wasn’t congested with Netflix traffic.

Yes; this, broadly, is why I think "neutrality" is kind of a silly concept.

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