I've been cleaning out my office now that it's the end of the year. I found a cache of articles from 2001 - 2003 about how the world will be taken over by outsourcing. I'd always felt that telecommuters could effectively compete against outsourcing. We may charge more, but we're local. If, heaven forbid, there were a need for lawsuits, it's the local court system (hey, I'm sensitive to the fact that my readers could be in other countries attempting to get work within their countries...), the montery system is the same, and chances are, the time zone is going to be close enough for a conference call.
The bottom line is to remember what you're selling: a solution that will address the client's problems. No matter where you are, you're there to help them. And that means, no matter what, you're going to do your best to solve it. It does help if you're in a closer proximity, but it's not the end all. I fully believe that people half way across the world can solve the client's problems if they're willing to make the effort to do what needs to be done to communicate.