Don't let the cloud providers fool you. Bandwidth is cheap, especially for Googles, Netflixes and Cloudflares of the world which peer with every ISP that matters.
Cloudflare wishes it peered with everyone and steers its own astroturfing pressure groups hoping to achieve that. The economics are similar though; their major product remains DDoS sinking, so driving down the marginal cost of traffic is Cloudflare’s strategy. The difference is that the content they mediate is thereby an incentive towards peering and not the core business proposition.
Yeah and that is their point. And it's actually highly problematic just how much discount the large giants get on traffic - it effectively blocks any competitors not backed by some very deep pockets.
Google owns a large percentage of the backbone and does not pay for traffic. It owns not just its own fiber, but also leases dark fiber and right of way.
Google has been buying railroad for access to right of way to lay fiber since the early 2000s. Peering agreements using their networks give them transit for free on other networks.
