Actually, I don't think that's the case. While it's true that the theoretical maximum speed of an individual connection would decrease rapidly as packet loss increases, the aggregate data rate of the traffic going through a single network element would not necessarily be affected all that much.
It's totally routine to see much higher network wide packet loss rates higher than 1%. The most I can remember was >15% sustained for weeks, for a few Gbps of real life traffic in a mobile network. ("Real life" as in hundreds of thousands of normal users, with the traffic coming directly from whatever servers they were actually accessing).