Companies that own their own infrastructure; e.g. literally the fiber across town, may only need to pay the peering fees. Some of the peering sites in the US are non profit, and as such these companies that own their own infrastructure are able to connect at-cost, or even at no cost [1].

I have no doubt that large companies take advantage of the above fact to get their internet "free" [2].

Now, there are still very significant costs in getting fiber to the peering sites, whether they trench it or lease it, and there are also the costs of the higher end routers, engineers to maintain them, etc. So, probably it is more cost effective to buy "regular" internet services for many small to medium office locations.

There is a decent article in Wired [2009] that explains how Google likely leverages all this to significantly reduce their bandwidth costs for YouTube [2].

[1] - http://www.phoenix-ix.net/aboutus.html

[2] - http://www.wired.com/2009/10/youtube-bandwidth/

See https://en.wikipedia.org/wiki/Tier_1_network

Tier 1 means you're so central (at least in most of the world -- countries with local telco monopolies might be exceptions) that there is nobody upstream of you; everyone else is either a customer (who pays you) or a peer.

None of the companies you mention are Tier 1, so they're all paying someone upstream for at least some of their traffic. Every big company has people working to reduce that cost. For example, Apple and Microsoft might decide to peer with each other in some areas, and carry each other's traffic for free rather than paying someone else to carry it. And we know Google has invested significantly in their own fiber.

Seperate the big companies into two groups. Those that provide content & those that don't.

The companies who provide content are more appealing to the end user and so Tier 1 IP providers will be interested in allowing them to host CDN platforms on the edge and connect into their networks so even if they do pay, it will be a very competitive rate. Then peering agreements will reduce the requirement for purchasing IP even more.

Companies who don't provide content but are huge, will have a department specifically for negotiating competitive rates & will again take advantage of peering in a big way.

Dark fibre is a different product to IP transit but again, negotiation teams will work to get huge discount.

I don't know the details but those Wikipedia articles might help: http://en.wikipedia.org/wiki/Peering http://en.wikipedia.org/wiki/Internet_exchange_point

Yes, they do. They purchase access from commercial telcos. Even in cases where they operate their own equipment, they will lease dark fiber from a telecom.

Some companies will set up their own internal MPLS network, and it starts making sense when you grow to a certain size.

Do you mean like the offices that they have, or the datacenters that they run?

In both cases, the answer is yes.