I used to think this had to do more with isolation from the potential for immediate physical violence, and yet even that seems to have been invalidated by what people seem to be willing to do to each other in real life.
I don't think the root cause is the internet. It's optimization algorithms. From my perspective we have reached a moment in time when regulatory control might be the only solution. I am definitely a small government guy. That doesn't mean no government, just the judicious application of the massive power government can wield.
Over the last several years we have watched two loved family members diverge deeper and deeper into ideological pits of hatred, all fueled 100% by Facebook. One of them on the ideological right and the other on the left. I only use FB to keep in touch with close family. It has been very painful to deal with these two. I've had to snooze them for months at a time in order to not have the walls of hatred they produce pollute my life.
What's sad is that we all watched this happen in slow motion over several years. In speaking with other family members from time to time, comments like "Did you notice that uncle Steve..." (made-up name). Once the problem was obvious it was too late, they won't reason with anyone and logical arguments are pointless.
This process is a familiar one from another domain: Self radicalization of terrorists.
The fact that the FB algorithm (and, to be fair, others) will almost instantly send you full-tilt into a narrow corner of the universe, keep you there and dig deeper and deeper into that hole is the problem. The algorithm has no "return to normal" functionality.
Try it. Go to FB and watch a video you would not normally click on. Within a few clicks you are trapped in that general class of videos. I ran a test on this a while back. Getting out of the hole they dig for you takes significant effort. Which means people will tend to continue clicking on the things that drop them deeper into the hole.
I understand the utility of this when wanting to learn about how to remodel a bathroom. However, there are a range of topics or areas that should never descend into these gradients and should have a strong automatic reset function. The easy one here is politics. Do not facilitate entry into resonant chambers in any subject related to politics. I know it's hard to define this but it is hard to argue that these algorithms have not caused harm.
On your point about communities, news, etc. being mostly local at some point in the past, you hit it right on the nail. Politico did a great article on this that opened my eyes many years ago and helped me understand why things have been so terribly screwed-up. Here it is:
https://www.politico.com/magazine/story/2017/04/25/media-bub...