(1) Premium bandwidth can be understood as partnerships that host makes with some high quality bandwidth carriers or providers. Such carriers are measured using tiers, 'tier1' being of the highest quality.
(2) A Tier 1 carrier operates and owns their physical network. They then sell the connection to a network.
(1) Yes, upgrade/downgrade procedure is very easy and fast. However, sometimes it requires an account transfer to another server, Upgrades/downgrades are processed at the regular renewal price: discounts, coupons are not applicable during this procedure.