"which they consider an additional expense"

Verizon can CONSIDER it an additional expense all they like. But it is a cost of doing business that they took upon themselves as a result of the service which they have sold to their customers.

Verizon has only incurred this cost because they advertise and sell asymmetric internet connections to their customers. Which their customers then expect to be able to "collect" on, so to speak.

"keep their paying customers happy"

In this case we can see that Verizon is not acting to keep their paying customers happy. Level3 was never a paying customer of Verizon. Verizon Residential subscribers have been and continue to be customers of Verizon.

What Verizon is arguing is that Level3 should become a paying customer of Verizon in order for Verizon to be willing to spend the money required to keep Verizon's already paying customers happy.

You might call that "double charging" or "abusing monopoly power" or perhaps even "holding their own customers hostage" but I can't see how you can call it "perfectly rational".

Again, go read the "Folly of Peering Ratios" white paper on the site you linked me to: http://drpeering.net/white-papers/The-Folly-Of-Peering-Ratio...

I don't think that Comcast or Verizon are inherently evil. I've had good experiences doing business with both on the commercial side.

But when they deliberately throttle their customers network connections at peering points for the sake of extracting additional money from content providers because they have a monopoly over their residential customers I can't help but get at least a little bit upset.

If there were viable alternative choices for broadband, let them do whatever they want. I can always switch away from them to someone who provides me with better service. But when they actively lobby to prevent municipalities from constructing their own broadband networks (which would provide competition) and when they actively lobby to get the FCC to change the rules to favor themselves over consumers BY LAW I also have a problem.

Introduce enough competition into the marketplace and I don't care what any one particular player does. But lacking that competition I can't help but pass judgement on those who do not play fair.