If I've understood correctly, geographical addressing will lead to forced interconnection of providers in the geographical area
It would only be forced if geographical IPv6 addressing was the only kind available. But if geo IPv6 addressing is offered as an option, then market forces can sort out which way is better. To allow market forces to work, you would have to offer every company, both kinds of IPv6 addresses.
but also of carriage of transit traffic destined to other providers' customers, i.e. you as a provider would be forced to shoulder costs with no way to recover them.
One would assume that if you interconnect with your geographical neighbours for the purposes of exchanging geo-addressed traffic then you would also work out a cost-sharing agreement of some sort. As long as geo-addressing is optional, this type of problem will not exist. In the end we may find that geo-addressing dominates in some parts of the world, where it suits their culture and communication patterns. And the current random addressing dominates in other parts of the world, such as the USA, where chaos is highly valued in the culture. I don't see geo-addressing as a cure-all, just an option that we should make available using the vast reserved space in IPv6. 50 years from now the Internet will not be able to cope with global routing table size using the existing random addressing scheme because every small and mid-sized company will want to be multi-homed. Multi-homing is something that people learn to need when they see the disasters that happen to single-homed companies. Over time, basically every organization will want to be multi-homed in order to spread the risk. In fact, it may become a requirement of many business insurance policies. In a world where geo-addressing is widespread, a North American ISP can have a single route for all of Europe. A small German company can have geo-addresses, and be connected to three local ISPs who all peer locally to exchange geo-addressed traffic. Any two of those three ISPs can go off-line and the small German company will still be fully connected. We have enough knowledge of intercontinental cable routes today in order to design a geographical aggregation topology. There are unlikely to be any significantly new intercontinental or overland paths that could not be predicted based on today's knowledge. It would make an interesting university research project to design such an addressing topology and I hope that someone will take up the challenge. Until we have this kind of work on the table to discuss, it is hard to prove that geographic addressing will work or that it won't work. --Michael Dillon P.S. if anyone here is under the illusion that I am talking about assigning IPv6 addresses to countries in the same way as E.164 addressing, then you should check the difference between geographical and geopolitical in the dictionary.