There is competition. It’s just that many people don’t know or haven’t tried them. Here are three providers on par with Fastmail but are way cheaper if you need multiple mailboxes — Posteo (posteo.de), Mailbox (mailbox.org) and Runbox (runbox.com).
But I do believe that even these cheaper ones are expensive for what they provide in terms of storage capacity, number of aliases, etc. Costs are supposed to go down over time, and prices too.
There's also development and maintenance costs? Someone needs to build that web UI, android and iOS apps, kick those servers when they misbehave, answer the phone or reply to your enquiry?
Except for the apps, cloud hosting providers already give you all of that for a better price. I also don't want an app... IMAP is a standard, you know.
It's cool you spend your time and money doing things you like (regardless of whether those RFCs will be implemented by email servers and clients) but don't make your customers pay for it. Set up donations or something.
This 1-XS server costs 2€ every month and it could perfectly handle the email of hundreds of users. They are charging you more only for yourself, and that's not even factoring in the economies of scale.
But I do believe that even these cheaper ones are expensive for what they provide in terms of storage capacity, number of aliases, etc. Costs are supposed to go down over time, and prices too.