Someone made the point that the Water company typically "oversells" it's
capacity, allowing a larger feed to each residence than could reasonably be
fed all at once.

Accepting that as a valid premise (which it may not be), it's still a matter
of accurately estimating how far you can oversell your capacity.  One of the
reasons for the failure of a lot of ISPs is they did that estimate badly,
oversold too far, and people got pissed and dumped them.

One of the main ideas driving broadband, often represented to the unwashed
hoard as "no dial up", is that everybody has full time capacity, as compared
to the phone network where there aren't enough lines for everybody to be on
the phone at once.  It's the answer to "what if everybody wanted to be on
line all the time?".