Settlement free peering only happens if the traffic is balanced. In the case of Level3 and Verizon, it's not, hence Verizon's point (and apparently it was Level3's point when dealing with Cogent) is that the settlement free peering is not appropriate for such lop sided traffic and Level 3 needs to pay via alternative arrangement with Verizon.

Bandwidth doesn't grow on trees :)

Verizon's position is that simply adding more cards within the free peering agreement will make it even more unbalanced in level 3's favour, hence their suggestion that level 3 pay for bandwidth through a different agreement.