What I'm proposing is many individual blockchains, where blocks in any particular blockchain can me produced *only* by nodes with Internet bandwidth originating from a geography particular to that blockchain (for example, from a specific country). Within one country or even a part of a country, dedicated bandwidth prices converge above some price level.
Here's another potential problem though:
What is your proposal to handle the case of cloud service providers all concentrated in one region (e.g Northern Virginia) reselling VMs with gigabit speeds, since a bunch of users can sign up for them and then starve out everyone running a node locally?
You would have to divide the blockchain geography into very small regions which are at most the size of zip codes, just to keep all the big providers congregated together. Is this something you're willing to do?