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Am I misunderstanding American internet service completely, or is this as obscene as it sounds?

I pay 40€ a month for a gigabit connection to my flat in 18th-19th century built neighbourhood. 25€ for unlimited 400 Mbit/s to my phone. Actual speeds match what is promised.

No. Your connection is not a business broadband connection.

You pay that much to get guaranteed throughout and bandwidth at the max whenever. Guaranteed with an SLA.

Your residential broadband is contented, you share a pipe with multiple households.

Like with GPON passive optical, your connection to the exchange point may be shared with 32 homes and is a 2.5 Gbps downstream and 1.25 Gbps link.

You don't have a gigabit connection, your building does. You split the cost and bandwidth with all other residents.

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