Tier 1 network
A Tier 1 ISP is a telco or internet service provider IP network which connects to the rest of the Internet only via a practice known as peering. They are commonly called backbone networks because they handle massive amounts of data.
The name Tier 1 refers to their position at the top level of the heirarchy of network providers. That is, the Tier 1 providers own the physical medium over which information is carried, as well as the network equipment which manages that information. The Tier 1 providers make peering arrangments with other Tier 1 providers, often at Internet_Exchange_Point, in which the two networks agree to carry each other's traffic at no cost. These providers, in turn, provide access to their networks, called transit, to smaller companies for a fee. These smaller companies are still very large Internet providers, but since they purchase transit they are not considered Tier 1. Companies at this level which purchase transit exclusively from Tier 1 providers are commonly called Tier 2 providers. These companies, in turn, sell Internet service to even smaller companies, and ultimately, to end users.
The definition of a Tier 1 is a hotly debated topic, due to its frequent use as a marketing term. Many networks incorrectly claim to be a Tier 1 simply due to ignorance of the term, leading to a corruption of meaning in which the vast majority of those claiming to be a Tier 1 network are not. The issue is further complicated by the non-disclosure agreements which surround almost all Tier 1 level peering, which makes it difficult for carriers to officially confirm or deny the existence of peering, the physical connection of two backbone networks to allow data to flow between them. Without peering, customers using computers at home that are connected to one Tier 1 network would not be able to reliably connect to users on another Tier 1 network.
Some of the incorrect measurements which are commonly cited include numbers of routers (devices that direct data traffic between networks like a very advanced switchboard), route miles of fiber optic cable, or number of customers using a particular network. These are all valid ways to measure a network, but have no direct relationship on the status of "Tier 1". Another common area of debate is whether it is possible to become a Tier 1 through the purchase of "paid peering", or settlement-based interconnections which would allow a network to buy this status. The current opinion of most Peering Coordinators is that a true "Tier 1" is one which is entirely settlement-free and gained on the network's own merits. Tier 1 networks' peering points are typically done freely between networks of equal sizes because it is mutually beneficial. When one company is doing more work than the other, often quoted as twice the data, the larger will sometimes demand payment. This payment agreement is called transit instead of peering. This is what happened between Cogent and Level 3 recently.
Tier 1 networks are often noted for their extremely restrictive peering policies, which are generally regarded as being intended to set the bar for peering so high that no new networks can meet them. In addition to the obvious competitive advantage for marketing, Tier 1's gain a significant portion of their IP transit revenue from traffic which stays "on-net", by being delivered between two customers without ever leaving its network. Disputes over peering arrangements have frequently been the cause of disruptions of Internet traffic, including a recently dispute between Level 3 and Cogent. These disruptions primarily affect direct customers of each provider, who will no longer be able to contact direct customers of the other provider. Such disputes can also result in performance degredation across the entire Internet, as traffic must be sent over alternative, and possibly longer, routes to reach its destination.
For a list of Tier 1 carriers, see List of tier 1 internet service providers. The status of major Level 1 networks can be seen at the Internet Health Report
Notes
In Australia the term "Tier 1" is used differently. See Group of Four (Australia)