And for that matter, there really should be server farms outside of all major metropolitan areas to further reduce the lag experienced by residents.
As an example of the importance of this concept: when running bandwidth speed tests at say http://www.speedtest.net, I consistently get 10+ megaabits/sec on east coast servers - but only 1.5-2 megabits for west coast servers.
With lag being such a major drawback for sl, having metropolitan specific server farms would likely increase resident retention, participation, and overall investment in sl - further leading to commercial investment and the overall growth and improved resident experience for all.
Naturally this brings up the question of how to tie each metropolitan area's server farm into the larger grid.
Solutions:
1. sims could have a public designation of their physical location so that any given resident could choose one near their physical location
2. sims could be clustered on the grid by metropolitan area so that residents near that cluster's physical location could have a smoother, less-lag prone experience
In either solution above, the resident could venture off into other metropolitan servers at any time, but could expect higher lag.
Naysaysers may claim this would segment and limit SecondLife, but I'd argue quite the opposite. At the moment I rarely particpate in sl because of the lag. It just takes too damn long to have any fun - not worth it. If you get rid of the lag, not only will I participate - but so will countless other residents - adding dramatically to the SL experience.
If you like this suggestion, please do what you can to promote it to Linden attention - I'm not sure how to do so...