Although I believe that fast travel was originally in Daggerfall.
Wrong. It was originally in Arena.
In Arena, each city was surrounded by an infinite, randomly-generated wilderness. You simply couldn't walk from one to another. You could start a game, leave a city, put a weight on the "run forward" key and leave the computer running for two years; and you'll still be in that starting city's wilderness.
In Daggerfall, the wilderness was procedurally generated, the difference with random generation being that it was
always the same landscape and features you got. And it
was possible to walk from one destination to another. I remember I did walk all the way from Buccaneer's Den to Daggerfall once (with stops in cities and inns along the way). But it takes a very long time. Daggerfall was the only game of the series that had a nearly realistic scale (though, as always in this series, settlements were too small, looked nothing like medieval settlements, and there were not enough farmlands).
In Morrowind was introduced the Camelot model, meaning that you don't play in something that tries to be a real gameworld, but in a scaled-down version where you've got to imagine that one building is actually 100 buildings, and one NPC is actually 300 NPCs; something like that. (Numbers are very arbitrary and probably quite wrong. Cyrodiil should have something like 10 millions inhabitants, including sentient non-citizens such as goblins, ogres and minotaurs.) Hence, Camelot:
"Cyrodiil!"
"It's only a model."
"Shh!"
Now that this is said, in Arena and Daggerfall, when you fast-traveled, this brought to the screen a menu that wasn't simply "Travel to Sumplaiss Yes/No". You got a complicated menu giving you the time (in days) and the cost (in gold piece) your trip would take. And you had a lot of options: for example, you could choose to travel only on foot or by boat too (costs more but is faster if there is water between you and your destination), whether you camp in the wilderness or spend the nights in the inn (costs more but lets you arrive at your destination fully healed), and whether you take your time or hurry (travels faster, but arrives fatigued). So these options affected travel duration and cost. And in Daggerfall, fast travel spared the player countless boring real-time days wandering in a rather uninteresting procedural wilderness; while in Arena is was simply necessary to use it.
I haven't heard of anyone in lore who fast travelled. Various teleportation spells only, but to set points only.
If fast travel exists in Cyrodiil, then why don't the legions just teleport everywhere? None of this horse rubbish. Voosh. No need for Numidium, we'll just fast travel the armies into Alinor and voila, city conquered. What about Morrowind. Voosh. Ten thousand troops in Almalexia (not literally) and tada.
Makes you think, why didn't the emperor just fast travel to safety?
Fast travel is not teleportation. It's only fast for the player, not for the character. When you fast travel from a place to another, even in Oblivion, time passes. Go from Anvil to Cheydinhal and you'll see it quite blatantly. It's an abstraction of a boring long walk, not an instant magical teleportation.
This is firmly in the realm of pure gameplay. The lore is the same lore as, say, when Indiana Jones is moving from a place to another and all you see in the movie is a red line being traced over a map, rather than making you watch a real-time account of an uneventful boat trip over the Atlantic, followed by a plane trip (still in real time) from Britain to Egypt, etc. Imagine people on an Indiana Jones messageboard asking whether Indy magically teleport in ten seconds from the USA to Egypt by simply drawing lines with a marker on a map of the world -- this is the same thing as this thread. Imagine someone arguing that yes he does and it's ruining the lore of the movies, and you have the same thing as LH's post.
It's a bit like asking why the characters bother to sleep, all they need to do is to activate a bed for a few seconds and they're done, woosh, no need to rest for the full night! Except the night was spent during these few seconds.
Morrowind fast travel is where the serious lore apologies are called for.
I'll start: The Empire subsidizes ship and strider transport. They give out big payoffs to the operators, who charge a small fee to outlanders who must take advantage of native methods of transport. How else will the diplomats and men of business reach their destinations?
But the Guild Guides are just retarded.
If by "retarded" you mean "why can they only teleport you to other guildhalls while the Travellers' League could teleport me to any destination" I could somewhat agree.
If by "retarded" you mean "why can the mages teleport people" then I'll have to question whether you ever noticed the mark, recall, and intervention spells. Teleportation
exists in the lore of the game.
As for the cost of transport, no need to invent subsidies. It's simply a screwy game economy. Fantasy economy is always meaningless anyway, what with the tradition of using the gold piece as the smallest unit of money, and things like a steel dagger costing as much as two brooms or a loaf of bread. (For a laugh, try to look at the value of an actual gold piece in the real world. Then compare the price of a dagger, a broom, and a loaf of bread.)