Exchanges that matter...

Actually... many of the private exchanges are there for several other
reasons as well. First, it can be convenient to set up a connection
with a net you're passing lots of traffic to so you can go direct to
them instead of through 7 or 8 odd routers outside your
net. (obviously)

We were talking about tier 1 exchanges (i.e. between nation-wide and
world-wide backbones). They by definition pass a lot of traffic between
each other.

Second, it can be significantly cheaper to split the costs between the
participants and not have to pay a third party for access to the
exchange. (heck of a lot easier too..)

Well, if you have 6 providers you'll need 15 private two-party exchanges
to accomodate full connectivity in a region, vs a single public facility.

It is a classical example of economies of scale. Consolidation of
exchange facilities makes things a lot cheaper. (Providing there's a way
to sustain that much traffic in one place).

Third, and going along with the first point, private exchanges can
help to more geographically orient your local corner of the
network. That way, to get across town, you don't have to go to
mae-west, over to denver, and back down to phoenix to travel 6 miles.

This also serves to take a little traffic AWAY from the public NAPs
and can help reduce congestion and problems there.

That would be fine, if traffic had high locality. As is, practically
all Internet traffic is long-haul. I.e. i strongly doubt benefits of
micro-exchanges will outweigh their drawbacks.

The principle disadvantage of lots of small exchange points, as far as
I see it, is that there may well be potential for A) many more paths
to get from A to B, meaning that each router will hold that many more
BGP entries and B) possibly a greater potential for route flap.

C) a lot more facilities not generating revenue.