We have instead a *feedback* process. LOWER fees (not ZERO fees) means LESS mining (not NO mining) which in turn means LONGER confirmation times (not COMPLETE COLLAPSE) which leads to MORE FEES which leads to mining power switching back on. It's what engineers call a negative feedback loop, designed to keep the hashing rate broadly stable, or at least oscillating within a fairly narrow range.
Larger blocks and lower fees means less mining, but not longer confirmation times, since larger blocks will still be mined every 10 minutes.
All it takes for transaction fees to go down to ~zero is a benevolent or a malevolent miner occasionally accepting 0 fee transactions.
The question is, will stakeholders step up to mine "at a loss" to secure their funds?
Increasing the block size limit is a poor implementation of PoS...