The service area is always the entire city. Travel time determined whether you'll reach the destination before a building burns down, patient dies, or criminal gets away.
Early on, with little traffic, one single service placement can usually cover the entire city. Adding more vehicles lets you dispatch to more places at once. Once traffic increases, the effective service area is reduced, no matter how many vehicles you add (except for helicopters). You can wind up in a situation where a vehicle can't reach the building next door because it can't even exit the vehicle bay. Good placement, road layout, and public transportation will keep your services most effective.
You'll notice that the game lets you plop the vehicle bays apart from the building. Don't lay them all next to each other so they exit on the same road in the same direction. Place them on opposite sides of the road and across intersections. That way, traffic in one direction will only clog up some of your vehicles instead of all of them.
Most areas are "good enough" to make a self-sufficient city. I have yet to rely on another city for stability.
That being said, cooperation is important for a specialized city to reach maximum efficiency. Once you've established the basics, the limited city area leaves you with little room to expand buildings important to your specialization.
For example, let's say you want to manufacture electronics. To do this in a single city you need:
- Educated sims, meaning universities, colleges, high schools, elementary schools, and libraries.
- High-class residential for workers, meaning lots of parks and services.
- Consumer electronics factory.
- Trade buildings for trading globally, shipping freight, and improving your trade.
- Boats and trains to help ship freight.
- And finally, TONS of high-tech industrial.
By the time you cram in everything up to the high-tech industrial ("everything" takes lots of space, trust me), you're left with little space for expanding your factories. But your factories are your primary source of income in a manufacturing city! This will heavily impact your freight and electronics output so you won't see the godly profit you should be making.
If you can get your basics like power, water, police, fire, healthcare, and even your educated/high-class sims from somewhere else (this is possible with another university city or the group project Arcology), then you save all the space dedicated to those basics, meaning you can make more manufacturing and make a larger profit.
Something to realize is that this is not only good for the manufacturing city. The manufacturing city greatly benefits from recycling, so you can save every other city in your region the trouble of dealing with recycling and help them reduce their garbage. The manufacturing city also specializes in high-tech industry, so you can provide freight to other cities so they don't pollute with their own inferior industry. Combined this makes other cities very clean, which lets them focus on strengths like tourism and education - you get the idea :)
You might be wondering, "how can a city providing the basics make godly profits?" On top of the money that cities have to provide you for your basics, you can pair the basics with what they support well. A city with a strong police force can handle the horrendous amount of crime from casinos. Casinos spill crime to other cities, meaning other cities will want more of your police, meaning you expand your police force and can support even more casinos. Circular profit enabling - yes please! ... just be careful the crime doesn't get out of control. Learning which basics and specializations pair well together is what will make your regions successful. Some pairs I've thought of:
- Industrial cities need strong fire-fighting to handle hazmat fires.
- Education cities have low power and water requirements and can research and provide clean power and water.
- Cities with lots of garbage and low-tech industry need strong medicare for sickness.
- Trading cities need recycling to create plastics, metals, and alloys.
- Commercial, tourist, and casino cities need strong police forces to handle crime (as I've already said).
TL;DR
- Get basics from neighbours.
- Build tons of specialized stuff.
- ????
- PROFIT!!!
Best Answer
The short answer is: this no longer matters because the servers for this game are gone. Only offline play is available, which means only cities you control in the region on your computer can interact.
The longer answer is that cities within a region interact asynchronously as described here. This allows each city to continue to function as though the other cities were being played even when they aren't. Since time passes differently for each city, resources can easily be created/wasted.
Available surplus resources (power, water) are capacity split as described here. The consumer of surplus resources pays a modest amount per day if they "purchase from region". This is much cheaper than generating the resources locally. The producer of surplus resources gets paid a meager amount which can be observed in the budget screen. The amount is automatic. Note: due to the asynchronous nature of game play, it doesn't matter how many days the producer supplies the resource - nor how many days the consumer gets the resource... the surplus resource is stably provided each day.
Assigned service vehicles behave as described here. The assigning city may get paid a meager amount for each vehicle - if so, it will appear in the budget screen. If so, this would be well below the maintenance cost of the buildings to operate those vehicles. The assigned city pays nothing. Assigned police cars will bring back criminals, assigned garbage trucks will bring back garbage, assigned ambulances will bring back sick and injured people. Note: this is basically a negative for the assigning city. Generally, you should only assign vehicles when the problem they would otherwise solve would spill into your city (crime). Omega trucks are a special case.
Lastly, schools. If students come from other cities to your community college or university - the benefit to your city is local tech points. If students come from other cities to your high school or elementary school - there is no benefit to your city.
If your students leave the city to attend school out in the region, then your city will get the residential education those students earned. Caveat #1 this is no different than attending a local school. Caveat #2 students leaving the region tend to glitch out and never return. If you find yourself with fewer local students than you should, remove all your school bus stops (to stop/limit regional education) and bulldoze/cycle your residential buildings to get them to move back in.
As such, regional students are to be avoided by providing enough education in each city that no one decides to leave.