Benjamin --
The perimeter rule at
LGA means that airlines cannot offer non-stop flights to points beyond a certain distance. I am much more familiar with the perimeter rule at
DCA, which is quite similar.
At
DCA, the general rule is that airlines cannot fly to any points beyond 1,250 miles. Originally, the limit was to be 1,000 miles, but some influential Texas congressmen got it changed to 1,250 so
DFW and
IAH would be included. The purpose of these restrictions was to reduce traffic and keep widebodies out. Recently, however, some exceptions were awarded to Frontier, America West, and other airlines to fly to places like
LAS,
LAX and
SEA.
I am not sure exactly how the perimeter rule at
LGA works, but I've heard it is very much the same. I think exceptions have been granted, but I'm not sure how many. I don't know what the guy who mentioned "grandfathering" is talking about, to my knowledge it doesn't exist. If it did, I think there would be many more west coast flights to
LGA, as you mentioned.