Which would help for the crazy popular meme videos, but I bet the long tail on YouTube is insanely big, even if you did have the “watch next” engine getting in on the game steering you toward content already present in your nearby caches.
YouTube is estimated to have 1 exabyte [1] of data. Petabyte level storage is not unheard of [2], and a gateway server with 5PB storage would cover ~0.5% of all YouTube videos, which should be sufficient to serve a very high percentage of the most popular videos.
They can still afford to serve the occasional obscure video from the origin servers.
Yup! This is the reason why its so cheap for them. Other companies in similar positions have cache nodes in the ISPs and this dramatically lowers the cost