The reasons for co-location that have been mentioned so far include...
- zero-mile circuits
That means expansion of that "circuit" is free.
- a hardened location for equipment
That is hardly relevant, as all large players have facilities just
- to establish a local presence rather than building out one's own space.
- skepticism about the value of the fast packet services; the skepticism
has several flavors:
- reduced bandwidth due to protocol overhead
That is not "scepticism" but a sad truth. Getting 40% less bang
(on a typical IP traffic mix which includes *lots* of packets barely
exceeding one cell) is rather silly.
- less reliability than a shared FDDI
Shared FDDI is simply a way to offer lower performance for lower
price. ATM port costs are not variable.
- performance of ATM switches compared to FDDI switches
FDDI just works. It worked five years ago.
'Zero-mile circuit' isn't clear to me because, regardless of the technology
used for the NAP, it's still necessary to purchase a circuit from your site
to the NAP.
The difference is between the clearline circuit and circuit with 40%
protocol overhead. Some big players are carriers themselves and
want to use _own_ circuits whereever possible.
The reason for collocated NAPs you completely missed is called
"scalability". Having all equipment in one room provides a lot
of flexibility in regard to interconnections. For example, if
A and B found that they have lots of mutual traffic they may want
to plug one more FDDI board in their boxes and drag a private FDDI
wire, to offload the traffic from shared infrastructure. When
new whiz-bang LAN technology appears you can easily upgrade connection
by plugging a new board into the collocated router, leaving the
old interface as a backup.
Which also leads to the reason #2 which you also missed -- redundancy.
When ATM switch is fried or went banana you're dead. FIXes and their
progeny had backup connections from the day one.