Wells has a far superior bus service than Yeovil although the population of Wells, Glastonbury and Street combined is 31300, and Yeovil being 45000. I'm afraid rural bus services now are only used by people who are either too old, too young, too ill or too poor to drive. So no big profits for bus companies anymore.
I think it's more nuanced than just comparing relative populations.
For Wells, you have two main corridors north to considerably larger centres. This means a greater pull effect - more employment opportunities and better shopping but also a greater potential for traffic being pushed out of those areas (grannies having a day in Glastonbury, tourists in Bath having a trip to Wells).
It's interesting to see what was introduced at RBG/RBC time for Sunday services; services around Taunton to the major towns have stayed (i.e. Wellington and Bridgwater) but not to the smaller towns (e.g. Chard). Around Yeovil, none survived the loss of council funds and neither did some of the more esoteric services (e.g Wells to Frome) and that perhaps illustrates the relative strength/critical mass for services in general.
IIRC, First did retain the 377 for a while on a use it or lose it basis.
Also, if I go back pre-RBG, the main daytime frequencies are actually generally better than they were:
29 was three hourly
54 was two hourly (with odd extra short or 54C in there)
376 was hourly to Bristol and two hourly to Yeovil
163 was two hourly
21 was half hourly
22 was half hourly (I think)
28 was hourly (with hourly shorts to Bishops Lydeard)
173 was hourly
126 was hourly (with hourly shorts Weston to Cheddar)
The issues are perhaps many:
The RBG funds etc provided a new baseline for expectations compared to the true post de-reg picture (1986-2001)
The cutting of council funds - even compared to the 1992 position, the loss of evening services on the 58, 21 and 22 for instance, as well as reductions on services
First deregistering marginal routes or, more often, just not being realistic with margin expectations and so losing tenders = loss of network traffic
ENCTS - most pronounced on local services where revenue has fallen whilst no likelihood of growth from additional patronage, meaning local services are under greater pressure