This is true for the current transition, I think, but historically it was only a quite short period that newspapers had any sort of monopoly-esque hold over particular geographical areas. The traditional business model didn't depend on that; rather, there were many newspapers competing, even in smaller towns.

The competing-heterogenous-information-sources model discussed here is actually closer to how the newspaper industry worked. Some of the competing newspapers were large companies, others were smaller or even a single editor/publisher; some were thick while others were barely a few pages; some were dailies while others came out less often; some were morning papers, while others came out in the afternoons or evenings; some relied primarily on subscriptions while others focused on retail or street sales; some were business-targeted while others were targeted at home readers, and still others were targeted at explicit political/interest groups; etc.