aren't passing on the costs to the decision makers.  The users'
performance interests are served by getting the fastest downloads
possible.  The ISP's financial interests would be served by their flat
rate customers getting their data from somewhere close by.  If it becomes
enough of a problem that the ISPs are motivated to deal with it, one
approach would be to get the customers' financial interests better
aligned with their own, with differentiated billing for local and long
distance traffic.

Perth, on the West Coast of Australia, claims to be the world's most
isolated "capitol" city (for some definition of capitol).  Next closest is
probably Adelaide, at 1300 miles.  Jakarta and Sydney are both 2,000 miles
away.  Getting stuff, including data, in and out is expensive.  Like
Seattle, Perth has many of its ISPs in the same downtown sky scraper, and
a very active exchange point in the building.  It is much cheaper for ISPs
to hand off local traffic to each other than to hand off long distance
traffic to their far away transit providers.  Like ISPs in a lot of
similar places, the ISPs in Perth charge their customers different rates
for cheap local bandwidth than for expensive long distance bandwidth.

When I was in Perth a couple of years ago, I asked my usual questions
about what effect this billing arrangement was having on user behavior.
I was told about a Perth-only file sharing network.  Using the same file
sharing networks as the rest of the world was expensive, as they would end
up hauling lots of data over the expensive long distance links and users
didn't want to pay for that.  Instead, they'd put together their own,
which only allowed local users and thus guaranteed that uploads and
downloads would happen at cheap local rates.

Googling for more information just now, what I found were lots of stories
about police raids, so I'm not sure if it's still operational. 

-Steve