What we need first is incentive for smart, dedicated, part-time sys-admins to devote time and effort to community hosting.
Without this, it will work --- in the same way that open source works --- without any guarantees or commitments whatsoever.
In other words, you're on your own for the most part. So it really is just a variation on self hosting. By the way, we've already been there, seen that and done that --- it was called "co-location".
When you need something more with service and reliability, well --- you're right back to paying corporate overlords.
But thanks for the round trip thought experiment.