I've seen a similar thing myself. It simply obtains the location of our ISPs. No worries.
Oh, it's not terribly unusual -- for most people. In my case, it's exceptionally unusual.
If I go to a geolocation site, it is placing my IP address in Portland or Augusta (of those that are the most accurate). One has me in Kansas, while another has me in Massachusetts. Two of them have me in a small town in Kennebec County, but that town is some ~70 miles away. (At least it's not a big city.)
I use a very, very small ISP whose only activity is here in Maine. They have a limited presence even here in Maine, as they're the ones rolling out fiber at a snail's pace.
Actually, now that I think about it, that small town is
slightly closer than Augusta.
As I was curious, I went and visited dozens of the sites that do geolocation. None of them were close.
That tiny town does share the same ISP, but I am not in that town. (I'm very familiar with the town, but that's a story for another day.)
Out of all of those that I've checked, none even got as close as Rangeley. I just checked a few more as I wrote this. None of them is accurate.
Whatever channel MSFT is using to get that data is pretty good. I don't think I've had anything that accurate in the 19 years I've lived here. Not once has anything identified my location properly, and all sorts of web apps have tried.
I'm not actually in Rangeley. I'm just not far from Rangeley. That they got it that close is pretty interesting.
Also, with all of the telemetry, they have to know that I don't really have an enterprise license.
As an aside...
A long time ago, when Windows was fairly new, more than a few of my friends all held the same conspiracy theory. They theorized that Windows was intentionally easy to pirate so that it'd become the dominant OS even in impoverished areas. The theory went that they'd try to make it both easy enough for anyone to do, but difficult enough so that your average person wouldn't bother doing so.
It was a pretty widely held belief in my social sphere. I'd need some actual evidence to believe it to be true, but I'm also not in a position to say that it is not true. From a business standpoint, it does make some sense. If they're going to pirate an operating system, it might as well be their operating system -- as that helps ensure vendor lock-in.
If we look at it today, it seems to still be true that it's not hard to get Windows installed and activated.