A lot of the cost is pulling wires, but the equipment on both sides is also a major expense. FiOS scaled up from 75 mbps to 1 gbps over the same passive infrastructure, but the cost of upgrades was substantial. BPON line cards were upgraded to GPON linecards, and an upgrade to NGPON2 is in the works. As bandwidth went up, the number of customers per line card had to go down. 1G router ports had to be upgraded to 10G router ports. Etc.

I mean, just do a traceroute and see how many hops there are before you get to a peering node. In a municipal system, that's all infrastructure that the government has to pay to upgrade.