when this situation has existed in other industries, gov't intervention has always resulted. even when the scope is international. i've not been able to puzzle out the reason why the world's gov'ts have not stepped in with some basic interconnection requirements for IP carriers.
Some governments have stepped in, unfortunately the ACCC (the government body in Australia charged with preventing monopolies), while forcing the vehemently anti-peering Telstra to peer with a very small group of other providers (Optus, who have been purchased by the normally pro-peering SingTel who then have not peered the Optus network with their own network, preventing it becoming available to SingTel's Australian peers; and OzEmail, who were purchased by WorldCom as uu.net were not of sufficient size in Australia to justify a peering mandate, so rather than pay for traffic they paid $0.5billion to buy an ISP who already had peering), have failed to force this peering to happen on terms which would make it easy for other companies to join the situation. Rather, should a new company wish to join the peering, they would have to (after applying directly to peer with each company, having it rejected, and going to the ACCC indicating this rejection is believed to be a form of anti-competitive behaviour given the equitable nature of traffic between the two networks, etc) establish an individual direct link in most states to each ISP who is currently part of this peering. If the peering were happening at IXs/exchanges of some sort the cost of entry would be a lot lower and at least two to three more companies would most likely have approached the ACCC to participate in this peering by now. It still would require a full national network to reach each peering exchange but at least it would put an upper bound on the cost of joining the "Australian tier-1 peering" (or however you want to label it). David.