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A tier-1 carrier is an Internet Service Provider (ISP) that can serve its coverage area entirely through settlement-free collaboration with other carriers, rather than having to pay tolls to other companies for using parts of a third party’s IP network. Tier-1 carriers tend to have large coverage areas and large footprints, with a lot of infrastructure and massive financial resources.
Organizations that operate tier-1 networks include AT&T, Verizon, Sprint and T-Mobile.
Techopedia Explains Tier 1 Carrier
Peering is key to an organization’s tier-1 carrier designation. Many tier-1 carriers have peering agreements that involve network sharing and data transit collaboration.
A tier-1 carrier charges other carriers for access, and tier-2 or tier-3 carriers must pay for data transit. For example, a carrier with network capability over most of its area may pay another carrier for "last mile" service, where the data is transmitted from one node to the endpoint.
Smaller carriers generally combine peering and paid data transit agreements.
