Time to quote Geoff Huston one more time.
"A true peer relationship is based on the supposition that either party can terminate the interconnection relationship and that the other party does not consider such an action a competitively hostile act. If one party has a high reliance on the interconnection arrangement and the other does not, then the most stable business outcome is that this reliance is expressed in terms of a service contract with the other party, and a provider/client relationship is established"
Those people less versed in the art of peering may not understand why the peer who has been disconnected does not consider the action to be competitively hostile. Simply put, in a true peer relationship, the party who terminates the interconnection is shooting themselves in the foot and inflicting as much commercial pain on themselves as they are inflicting on their peer. The reason that it is not "competitively" hostile is because it does not increase the ability of either peer to compete. Rather, it damages both of them equally because true peers are equals to begin with. As vijay points out, this whole issue is not really about true peering because such equality between peering partners is rare. It's really about the business case for settlement free interconnect and that is rather more complex than merely the choice between "free" traffic exchange and paid transit. --Michael Dillon P.S. would the Internet be worse off if all traffic exchange was paid for and there was no settlement free interconnect at all? I.e. paid peering, paid full transit and paid partial transit on the menu?