The prices will be worse until the higher speed link problem is resolved. That speed advantage allows the HFT firms to have less risk, that less risk gets translated into lower spreads (ie better prices) on the exchange.
Conversely, the slower links cause the firms to take on more risk, for which they need to make more money, that happens in the form of increased spreads.
ten years ago, i'd say not a whole lot -- there were still competitors providing liquidity who weren't speedcentric. today, however, i think market liquidity would disappear. that's not to say all hell would break loose, but there would probably be wild price swings for an afternoon or two.
Market liquidity would not "disappear". Liquidity providers do not rely on their microwave lines quite that much (yet). In the case of a microwave failure (more common than you'd think), all one does is failover to physical and keep on pricing.
Worst case is widening your quotes while you reassess your view of the world (the book), but never withdrawing completely from the market.
This. Radio networks are not reliable even in normal conditions due to weather conditions or environmental events. You can fail over to another network seamlessly and keep chugging. If your competitor's faster system is still up you may lose money and widen out or turn off a particular product complex. Not a huge deal.
Anyone deliberately interfering with licensed radio transmissions would probably get a knock from some guys in black suits pretty quickly anyway.