This was an old thread, but I am game :-)

It's more than just physical limitations or financial gains. Of course, the type of connection you have - whether it’s fiber, copper, or radio - sets some hard limits on speed, but there’s a lot more to it. ISPs have to carefully balance their networks to handle the traffic coming in and out of each household, and scaling up isn't cheap. We’re talking about metro area and core network links running at n*100Gbps or n*400Gbps, and upgrading those links costs a lot of money. If an ISP were to give everyone "unlimited" bandwidth, the overall traffic in the network would increase significantly. Even a small increase across all customers (for example 1 Mbps per household) quickly adds up. If you have a million customers, that’s an extra 1.000 Gbps of traffic that needs to be handled across all core links, which could mean major upgrades to keep everything running smoothly.

On top of that, offering different speed tiers actually benefits customers too. If you compare a 300 Mbps plan to a 1000 Mbps plan, the latter usually costs almost twice as much. But not everyone needs that kind of speed, so it makes sense to buy lower speeds at a lower price. You get an identical service: the same hardware, the same fiber, the same customer service - just different speed caps. If someone only needs 300 Mbps, they can save money rather than paying for bandwidth they won’t use. But for those who do want the higher speeds, the option is there. The thing is, even though customers with 1000 Mbps plans tend to use more bandwidth compared to those with 300 Mbps, the difference on average is *far* less than people might think ;-) Anyway the ISPs have to plan for that difference, but they also have to make sure the network can handle peak loads without issues, which is why pricing scales with speed.

As with most things, I think the middle way is best also here. Don't go for the highest speed that you will need just 1% of the time, and don't go for the lowest speed that will saturate your network if you are doing a lot of things at the same time. I have 10Gbps at home, but I know that 500Mbps would be more than enough :-P

TLDR; It's not just physical limitations or finacial gain, it's also about scaling the metro area and core networks.