Taken together, unless you keep people from migrating from one petty dictatorship to another to find one they like, the outcome will tend towards a small number of big megalopolis-style communities and a middling number of mid-size ones.
It's not a bad idea by any means. It's essentially a mirror of an idealized pre-industrial agrarian society. There might be some wrinkles added by basic human behavior patters that could be worth considering carefully is all.
Reddit is a pretty good example of it both working, and very much not working.
It's not the pipe dream of what the internet was supposed to be back in the 90's, but I think it's safe to say that experiment has failed. Humanity has shown itself not to be able to behave itself enough for this.
I'm sorry if this sounds abstract or convoluted or anything, I've had a long day and am a bit brain-fried but I have thought pretty extensively about this. I'm having a bit of a hard time putting it down in a HN comment. Maybe it's worth the effort writing this up.