Some possibly good information about what's going on:
Cogent had a "test" peering arrangement with AOL. That means that it was
just a test to see what the ratio of cogent/aol traffic is to see whether or
not they qualify for a real peering arrangement. Cogent did not meet that
requirement, so AOL terminated the agreement.
AOL offered Cogent a purchased peering program, but Cogent does not want to
take it, because it costs money.
Cogent purchases transit from another provider, MFN, that as a peering
arrangement with AOL, but Cogent has chosen not to allow traffic to/from AOL
to go through MFN.
I would imagine this is because it'd cost Cogent money, whereas if it went
through the L(3) peering arrangement, it won't. So Cogent is now pushing all
the traffic over through their L(3) pipes, therefore, congesting them.
That's the reason for all the high latency.
Cogent, several months ago started the process to get more pipes into L(3)
for peering. Now they're trying to make the process go a lot faster.
The following is going to be my interpretation:
I think AOL purchases transit from L(3), so by Cogent pushing all their
AOL-bound traffic through their L(3) peering pipes, they're hoping that
it'll push AOL's transit bill up. This is going to be their playing card. I
Phew. That's about it.