Here are a few reasons why:
1. Frosted glasses are colder, which if the beer is proper temperature coming out of the tap, will induce excess foam. Impatient beer servers will proceed to pour much of this head off and top off the beer; sometimes holding the tap open over a tilted glass, effectively pouring beer straight down the drain with a direct effect on the profitability of serving draft beer. If the frosted glasses do not induce excess foaming, I wonder if the beer is undercarbonated or too warm in the tap line.
2. Beer served in frosted glasses ends up being served too cold. This dulls the sensory experience I seek in ordering a beer. The aromas and flavors of the beer are muted by the cold temperature. The sweetness, melanoidin, or roasted character of the malt is tamped down by the cold. The grassy, herbal, earthy, resiny, or citrusy notes of the hops are faint in a beer served too cold. Temperature is key in beer service and too cold is as equally undesirable as too warm.
3. What is the frost? One assumes and expects that the frost on a glass is water that froze when a wet glass was placed in the cooler. If it is water, it will dilute the beer as the frost melts. Occasionally, however, that frost is frozen sanitizer. Even a "no-rinse" sanitizer should be allowed to dry completely before the glass is reused for service. Nothing can quickly kill the flavor and aroma of a beer faster than chemical taste and smell of sanitizer.
If you believe I'm off base and think beer served in a cold glass is the way to go, I implore you to do one thing: Allow freshly cleaned glassware to completely air dry before placing it in the cooler. A dry glass will get cold, but will not develop frost.