Because there isn't a problem. LEO contains more than 200x the volume of commercial airspace.
We run out of spectrum and launch capacity well before Kessler cascades become a problem.
The further out you get, there's less atmospheric drag and each satellite is in view of the ground stations for longer but the cost of launch is higher and latency becomes a big issue. People expect 50ms latency for internet access not 500ms.
I will again note that if Saber Tooth tigers had put things in the orbits we have, it would still be our problem.
radio bandwidth: higher frequencies travel a shorter distance and provide more bandwidth. so you get frequency contention and also you need your sats to be physically closer
latency: the further a sat is, the higher the latency. not an issue for text messages. a huge issue for phone calls and general internet tasks. the further you "push" your sat "back", the worst the user experience is
there's other issues too, like geostationary vs geosynchronous and coverage and exposure.
Another 500 km won't affect latency much. It'll be around 3 more ms per round trip.
(Caveat: Not an expert by any means, just someone who had a similar question and did some reading, so my answer may well be incomplete or not fully correct.)
LEO maxes out ~ 1,200 miles radius, geostationary is at little over over 22,000 miles radius.