>others would use theblower orbits

Orbital slots are managed by ITU United Nations International Telecommunication Union who manages availability / congestion. SpaceX reserved substantial % of sub 500 km slots. Hence PRC announching their megacontestallations to reserve 500km+ slots, specifically because there isn't enough room in sub 500km for another mega constellation so they're grabbing next best ones.

PRC megaconstellation is targetting 500km+, they're not going to put up 10,000s of mega constellation without economic reusable, hence many options under development. They're choosing orbits based on assumed reusables not current launch costs / vehicles, which btw LM5 is $3000/kg, or ballpark enough to F9/kg for disposable megaconstellation launches despite cost. But bottleneck is resusable vehicles can sustain the required tempo for megaconstellation that disposable can't.