Pardon my ignorance, what is peering?
Peering is when two parties exchange bandwidth at no cost to either side (as opposed to paid transit, or rather confusingly, "paid peering"). Major backbones peer to ensure that each other's customers are reachable from either side (they also do a type of peering that acts like transit, allowing them to reach other peers through each other). Smaller ISPs sometimes peer with other small ISPs or content providers to try to lower overall bandwidth costs and/or decrease latencies, but they can't usually peer with the backbones directly.
Backbones peer with other backbones in multiple cities at once. For instance, Level3 peers with AT&T in Seattle, Los Angeles, Chicago, Atlanta, etc. At each of those peering points, traffic from one backbone can flow to the other directly. If I as a consumer buy from AT&T in Seattle and need to connect to a server on Level3 bandwidth in Seattle, my latencies will be low because the traffic doesn't have to traverse the extra distance to another city.
That's why Qwest's lack of good peering arrangements can be an issue -- Qwest peers with other backbones such as AT&T only in a few cities, and not in Seattle. So as a Seattle AT&T customer, my traffic needs to go down through California to reach a Qwest customer in Seattle. That adds about an extra 25ms each way, making my minimum ping to a server within my own city over 50ms when it /could/ have been less than 10, if Qwest had decent peering to my provider.
Qwest would be particularly bad to run a server on because /everyone's/ traffic would need to go to California, or Chicago, before going to your server in Montana (which is unfortunately a bad place for most people anyway due to distance from peering points for any backbone). Clients in the northwest would ping higher than clients in California, which seems a bit counterintuitive, and nobody would ping well.
-John
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