Massive companies already have an advantage when it comes to H1Bs. Because of the lottery system most H1B applicants will be rejected. If you have a small company and only need to hire 1-2 people how do you fill those positions with H1Bs? Apply for 2 and hope they both get it? What if they're both rejected? Even if they're accepted you have to have the applications done in the spring and they can't start work until the fall. Can a small company really afford to wait that long?

Your argument about the higher pay in certain areas is just wrong. Why can't a company in a lower cost of living area pay Silicon Valley rates? I'm getting paid more now in North Carolina than I was when I worked in Silicon Valley.