And this is precisely why the RBOC's are refusing to pay the settlements to the CLEC's. I personally agree that settlement based peering won't work (with current technology). Whoever figures out a good solution gets a truckload of beers from me ;)

In fact, this already happens with telco termination charges. For example, there are CLECs that call up dialup ISPs and offer free PRIs. They plan to make more on termination charges than they could possibly get from the ISPs in a competitive environment. Aside from the fact that they don't have copper in the ground, this is the reason CLECs don't want residential customers, since they would be the ones paying termination fees on originated calls. When enough CLECs are concentrating on businesses that only have incoming calls (ISPs, tech support centers, 900-style services, etc), Bell will scream to the FCC that termination charges need to be reevaluated. With this approach, eventually *no one* will want customers that make lots of outbound calls -- let the other providers have them and then collect the money when they call your customers.

The point is it is an unstable environment. Unlike capitalism where our innate greedy nature serves to balance the system, in this case the greedy nature serves to unbalance the system by promoting inefficient use of resources.

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