Balance-flow contracts are only used when each network is acting as a gateway where the end-point of the traffic is NOT IN either of the parties involved in the contract.
For example, suppose there are 5 separate networks, run by different groups: A, B, C, D, and E. C connects to A,B and D, and D connects to C and E. In this case, the only way networks A and B can connect to D or E is through the connection between C and D.
Now, if in this arrangement, the D or E networks are sending/requesting a lot of traffic to/from networks A and B, while C is rarely requesting data from D or E, then network C might have a fair argument to make that D is abusing their balanced-flow peering agreement. Basically, they are being asked to be a middle-man for all the traffic going between networks that are NOT theirs. They might ask for compensation for doing this job (carrying traffic between two other networks).
However, this is NOT what Verizon does. All of the traffic between level 3 and the Verizon network is bound FOR A VERIZON CUSTOMER. They are not a middle-man, they are the end destination. Now, if Level-3 is sending data over those congested level-3/verizon gateways that is bound for, say, AT&T's customers, then they would have an issue and could fairly demand payment.
"That is not the case, however." is indeed correct. The case is that Verizon does indeed act as a peer for business connections. Verizon is not just a consumer based end point on the internet. This is the crux of it all.
Verizon is charging customers for access to internet content and they're bringing that content in over a peer balanced connection with agreements in place, intended for use in an actual peering environment, by business costumers of Verizon who are paying to provide content in the same way that Netflix pays Level3 to provide their content over their peer connections.
The conflict here is that Netflix is paying to provide the content, Verizon's consumers are paying to get access to the content. That creates a connection chain that is unbalanced in some way. Verizon just wants that imbalance to be double payment for them and nobody else.
For example, suppose there are 5 separate networks, run by different groups: A, B, C, D, and E. C connects to A,B and D, and D connects to C and E. In this case, the only way networks A and B can connect to D or E is through the connection between C and D.
Now, if in this arrangement, the D or E networks are sending/requesting a lot of traffic to/from networks A and B, while C is rarely requesting data from D or E, then network C might have a fair argument to make that D is abusing their balanced-flow peering agreement. Basically, they are being asked to be a middle-man for all the traffic going between networks that are NOT theirs. They might ask for compensation for doing this job (carrying traffic between two other networks).
However, this is NOT what Verizon does. All of the traffic between level 3 and the Verizon network is bound FOR A VERIZON CUSTOMER. They are not a middle-man, they are the end destination. Now, if Level-3 is sending data over those congested level-3/verizon gateways that is bound for, say, AT&T's customers, then they would have an issue and could fairly demand payment.
That is not the case, however.