I'm going to put my hand up and say I have absolutely no idea how an ISP works. He runs cables to each house in the area... now where does the other end go?
Well there three tiers of ISPs, each one buying service from the one above them. It's ISPs all the way down, and the higher up you go the more expensive the hardware to run it gets.
At the T1 level it's more completely a mesh type setup, but even lower tier ISPs might set up peering agreements to bypass their main higher tier ISP where it makes sense for cost or service quality reasons. Or refuse to to extract more money as in the comcast vs level1 disputes over netflix traffic a while back