I can’t imagine satellites being able to compete with cell towers in bandwidth or capacity.

There are millions of cell towers.

During a major event, cellular companies set up portable cell towers (COWs) and even these are not enough.

And a cell tower that is right next to you still pales in comparison to a single cable in bandwidth.

They aren't trying to compete with cell towers. SpaceX is partnered with traditional carriers in each country where LTE service will be available and the Starlink service is intended to supplement those services by providing service where existing cell towers can't.

Yup. Small cell size is actually a feature for cell phone communications. You have to share bandwidth with everyone in your cell - the smaller the cell, the less crowding.

This is a general starlink issue, which is why I don't understand how is it economically or physically viable in crowded areas, such as cities, where the majority of human population lives.