The same is true for geographical aggregation. Geographical aggregation would require free transit, otherwise it is not compatible with the ISP's business models.
Geographical aggregation does not REQUIRE free transit. It is up to the ISPs to decide how to leverage geographical aggregation, how to recover transit costs and how to construct and change their business models. We should not assume that any of these things are static and unchangeable.
There is no free transit and thus it doesn't work. Business relations changes all the time and in a global markets world these business relations don't stop on country boundaries.
Such boundaries are artifical, the EU tries to avoid them.
Nevertheless, the Rhine river still exists. The Alps still exist. Is it easier to get fiber across the Rhine or through the Alps? This kind of geography affects the roads, railways and fiber paths throughout Europe. It affects the economy of European cities which determines the location and size of these cities. The city level of geographical aggregation clearly works. The real question is whether or not there is a level of aggregation possible between city and continent. I think that this question will only be solved by looking a the cities and the communication between them. In some regions there will be natural clusters of cities that form a natural aggregation grouping, for instance the U.S. East Coast. But in other areas there may be no clusters. In any case, national boundaries will almost never be related to these clusters except maybe someplace like China where culture, language and economy are closely tied to the national borders. But that is an exceptional case and perhaps it is no longer valid. Hong Kong, China has close ties with Singapore, another country. And cities like Khabarovsk, Russia probably have more economic ties with China than with Moscow. It's really a question for geographers to answer, not network engineers. So where are the geographers on this policy mailing list?
What they try is interleaving the West-East (X) and North-South (Y) coordinates bitwise in the search key and handle overruns by exceptions, like:
Geographical aggregation does NOT require geographical coordinates to be encoded in address bits. In fact, once the RIRs have decided how many addresses to reserve for each city greater than 100,000 population, and how to cluster cities in to larger groupings, there is no need for anyone to think about the geographical issues again. --Michael Dillon