What you get in exchange is a stable and predictable competitive game. I, and many others, experienced endless frustration in PUBG due to players warping around corners and shots that were clear hits missing due to CSP. And I'm not one to complain about this kind of thing unnecessarily. It really sucked.
The PUBG people didn't even geolock their servers at all last time I played, so you could be playing with people with 300ms+ ping which is just miserable.
For less successful games maybe you have to increase the maximum ping from 40-60ms to 80-100ms or something but it should be kept as low as possible. The more players per city, the lower you can make the maximum ping.
I realize that this might make it more difficult for people in Australia (or whereever) to find a game but it seems even more wrong to make the experience bad for everyone all the time. And at least when they do find a game it will be a great experience instead of terrible.
Of course, there is an upper limit on how much latency CSP and lag compensation can compensate for, and this varies by game. One game might work well up to 100ms, while another might work well up to 50ms.
> I realize that this might make it more difficult for people in Australia (or whereever) to find a game but it seems even more wrong to make the experience bad for everyone all the time. And at least when they do find a game it will be a great experience instead of terrible.
Here you're failing to account for an even more important factor: ability. Locking matches to such low relative pings would greatly restrict the number of players who were eligible to play together. That would greatly increase the skill gap between players, leading to a much worse experience.
Consider, e.g. Overwatch, which has all the Overwatch League pros on the west coast, leading to a skill gap between top players on the east and west coasts (which are usually matchmade within their own region). The more you compartmentalize players, the less likely that good players are going to be able to play with other good players, and vice versa, leading to a frustrating experience for everyone. (Not that Overwatch has good matchmaking in general. It's pretty bad, IME.)
Issues like getting hit after getting behind cover is frustrating, but it's going to happen sometimes--it's the nature of online games. But nothing is more frustrating than having teammates who aren't on the same level, or who don't have the same goals. It really makes the game feel like a complete waste of time. Matchmaking is definitely a harder and more serious problem than network latency now.
Probably more like 600, even semi-popular games using server locking (like Blizzard's Heroes of the Storm) struggle to complete matchmaking in under 10 minutes for 10 players. Matchmaking is a complex and challenging problem. Constraining MM to both servers <80ms away and clients that are all within 80ms of said servers, barring players with slower connections from playing the game, is a great way to ensure your game will never have PUBG/Fortnite levels of popularity.
As a game developer I'd rather people be able to play the game at all and feel playable than they all have only The Optimal Competitive Experience of Getting Headshots 100% of the time, after 10 minute queue times, or nothing at all. I would also like people who live in places where they can afford a computer, an internet connection, and my game, to play my game, and not just the continental US and EU metropolitan areas. Vietnam, Thailand, China, India are huge markets for games even with questionable internet quality.
Thankfully, most game developers and I concur on this so we all have more games to play. Maybe a compromise would be to allow players to check an option to only match with high connection quality servers/players when queuing, but so few players would check this option that one who does will have a relatively astronomical queue time to the majority who won't.
edit: for the record, I believe most such games running an actual tournament will use ping restrictions (or just run a LAN). Many also allow dedicated hosts to post servers with their own restrictions and constraints on who can join the server. I think that's a fine compromise. CSP shouldn't harm the experience if the latency of all the players is low enough that the prediction is almost instantly overwritten with server-side truth.