I think the internet is changing the need to live there. The net is such a useful tool in getting stuff out there. Either in competitions, sites such as here and others.
Without the ability to make contacts and get feedback and pitch your work virtually, I would agree it would be a lot harder to get people to read your work.
The key is getting yourself known and as Don said, that depends on your stories/hard work and a pinch of luck.
So far I have found the ability for the hard work. Now just need the killer story and luck,
Just read about a screenwriter from Dublin (Ireland) who has penned a script that Nic Cage is starring in.
http://www.iftn.ie/?act1=record&aid=73&rid=4280767&tpl=archnews&only=1Dublin is a long way from Hollywood. But guess if you have great work, the distance no longer matters.....