Yea, the technology has ramped up to cope with the allocated frequency space by using frequency division multiplexing. They have OFDM out there (called VDSL for Very fast DSL) that go up to something like 54mbps, but the distance limitations are severe and it isn't standardized yet. The problem is that it runs across unshielded twisted pair and has to coexist with voice - that makes the lower frequencies unavailable (used by voice), and the higher ones unusable (more attenuation/less distance/error prone).
edit: Here in Colorado, Qwest uses HDSL to deliver T1 lines on only two wires. They go T1(CO)->HDSL->T1(NIU)->CPE. They can do this and still guarantee 1.5mbps in both directions because they do not provision the line for voice, but instead utilize the voice freq to carry the larger upstream bandwidth. HDSL is not standardized as far as I know, and Qwest has custom HDSL<->T1 converters. It works out pretty well, but makes me feel like I'm getting raped because I'm paying $200 for a DSL line that costs $28.
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Two methods of error correction are generally available and they work together- FEC & interleaving. Forward Error Correction essentially learns where data is likely to be lost, then appends that data to outbound packets (two copies of some data per packet). This increases overhead, but works great ... unfortunately, it falls apart when the broken data is contiguous. Interleaving handles this by scrambling the data in a predefined manner so that if data is lost contiguously on transmission, it's not contiguous loss on reception/de-scrambling -- this allows FEC to work a lot better, because it's then missing little bits here and there, instead of huge chunks.
Depending on the ISP, modulation is DMT or CAP, but 99% of the time it's DMT. DMT basically splits up the the usable bandwidth into 4kHz chunks, then transmits on the ones that do not have interference (determined mathematically via learning algorithm). DMT, FEC & Interleaving are all utilized on both upstream and downstream links.
As for the colo, yes, the "office" side would access the internet-facing server via the T1 line (would not actually cross the internet at large). Most datacenters will aggregate the T1's usage & the server's usage into one bandwidth bill -- that makes traffic from the T1 to the Server free, but traffic from the T1 to the internet at large gets lumped together with the Server-to-Internet traffic, reducing billing headaches & costs. That's what we do, at least
