You're making good points, but one thing I want to emphasize is that latency is not the sole dimension of competition in HFT space.

Certain things may just be "table-stakes", but for many strategies table-stakes is the only requirement. Simply being "fast enough" may be fine if you have a smarter model, exploit niche opportunities overlooked by others, or are willing to shoulder certain risks that other HFTs are trying to offload.

To take this to the extreme, look at Renaissance's Medallion fund. It's certainly the case that much of what they're doing is "HFT-ish" in the sense that they're executing high turnover, high Sharpe strategies with short holding periods. Yet they've managed to continue to be successful from the 90s well until the age of HFT, without competing very hard on latency at all.

Markets are an ecosystem, and like biological ecosystems there isn't just one trait that predicts dominance.