Yale University and Pando Networks worked with Verizon and Telefonica to test so-called P4P technology, which localizes P2P downloads. The results: the impact of P2P on Verizon's network was reduced 50 percent.

Current versions of P2P systems speed up downloads of large files by breaking the files into small bits and distributing them among users. When a BitTorrent user requests a file, machines all over the world respond by each sending off a little chunk of the file. But the software doesn't check where the machines are located.

Localizing Traffic

P4P works by favoring machines closer to the requesting user, which has an outsize impact on network efficiency because P2P packets represent a huge amount of the traffic that passes over an ISP's network. Verizon senior technologist Douglas Pasko reported that 58 percent of P2P traffic remained local with P4P, compared to six percent with plain P2P.

On average, P4P cuts the number of hops traffic takes to a destination from an average 5.5 hops to a mere 0.89 hops, Pasko said. That means not only substantial cost savings to Verizon but also much faster downloads for users. Pasko said users of Verizon's all-fiber Fios network downloaded movies twice as fast as normally, and in some cases six times as fast.

So will other ISPs jump on the P4P bandwagon to cut costs and deliver improved performance ?

It's not likely, said Cynthia Brumfield, president of Emerging Media Dynamics, in a telephone interview. "You have to really be able to allow outside platforms to know something about your subscribers," she said. To implement P4P, Verizon communicated this information with select P2P providers, she said. "Verizon is apparently willing to do it, but most other ISPs won't be."

Not a Cable Solution

More fundamentally, technology blogger George Ou noted, P4P cannot "alleviate last-mile congestion on shared medium last-mile networks" like cable and wireless broadband. On Comcast's network, for example, there is only 10Mbps of upstream capacity for every 200 to 400 users.

For some time, the Hollywood studios have been urging network providers to shut down P2P networks that largely carry pirated content. Comcast's blocking of BitTorrent clearly showed Hollywood just how easily one of its biggest fears could be stopped. This week, Motion Picture Association of America President Dan Glickman announced industry opposition to a House bill introduced by Rep. Ed Markey (D-Mass.) that would ban content-based discrimination.

Verizon has fairly well rejected this appeal -- "We really don't want to assume the role of being police on the Internet," Verizon executive Tom Tauke said in January -- but AT&T has said it would work with Hollywood, Brumfield said.

"The cable guys are not talking about it. They contend they're not doing this on the content providers' desire," she said. "When it comes to distinguishing authorized from unauthorized content, it's not really ISPs' job to help another industry."