Charging variable rates based on location is the standard for just about everything, outside of e-commerce where prices are clearly advertised online and mass-market consumer devices like an XBox.

The mistake I see in compensation discussions is to assume that abandoning location-based pay means everyone gets paid as much as the company's most expensive location.

In practice, prices for services start to trend toward the least expensive locations once location is removed from the equation. There's a reason why the price of electronics manufacturing went down when it moved to locations like China, not up when manufacturing in China became accessible to to the expensive locations.