Many are holding the bitcoins rather than spending it. If there is many transaction then automatically fee will be reduced due to large number of transactions. But, many are just holding it to get gain. if this trend continues, we will see a fall sooner or later.
If small transactions not approved fast then many will move out, leaving big fishes take out all money and we are facing a downfall.
Fees and confirmation time has to be reduced in some way.
Do you have a figure you would like to cite? Steam did drop Bitcoin as a payment option, but other than that there hasn't been many news in that end.
You also got the relationship between transaction fees and transactions backwards. When there are no transactions in the mempool, you have instant priority. You could probably get away with not paying a fee. If there are a lot, then you will have to outbid everyone else's transactions to get quick confirmation.
Small transactions haven't been viable for Bitcoin for a while now and it's as strong as ever. It's still quite ideal for larger transactions, at least.