Coinbase is hosted on AWS in the us-east-1 region; this makes co-location incredibly cheap and accessible. The specific availability zone isn't publicized, but it would be trivial to do latency comparisons between the zones and figure it out - since Coinbase is a fairly new company, there are only 3 zones they could be in.
The CME & ICE were hosted at 350 Cermak in Chicago. One of the largest data centers in the world. Getting machines in that building was never hard or expensive.
But there was a whole cottage industry built up of consultants which promised to tell you which specific room or cabinet in a room had shorter cable runs to the exchange. There were companies that would idle those cabinets/rooms just so no one else could use them.
AWS hosting is more opaque and thus more likely to be gamed in this way. I wouldn't expect anyone to pay for physical presence information (the latency requirements aren't there yet). But I can totally see large players buying massive amounts of nodes in order to monitor/cycle through the best performing ones or in an attempt to impact the exchange operations. You would also expect to see the pay for Amazon employees with non-public details about node creation/communications to all of a sudden become much more valuable to large banks/trading firms.
Is this something that Coinbase needs to deal with right now? No, it isn't big enough or valuable enough for it. But long term the idea of "open" access falls apart under these conditions, and the more fair approach is actually the paid fee one. As counter-intuitive as that seems.
That's true, but a latency based test should still let you figure out which zone you need to run in. But everyone would need to do the test for themselves.
