In many parts of the world the local municipality is repsonsible for many public services such as water, roads, busses and the like. Logically therefore it would seem reasonable for the same local authority to provide broadband internet access as well. Of course, as a supporter of small government I would normally be strongly opposed to such actions, and indeed in many ways I am, but on the other hand I do not believe it is appropriate to pass laws that explicitly forbid municipalities from providing this service.
In America a number of cities such as Philadelphia and Chicago are trying to deploy broadband wifi services themselves rather than let a telco do it instead. The telcos are rather upset and are working at the state level to get laws passed forbidding this. Prof Lawrence Lessig has the details:
You'll be pleased to know that communism was defeated in Pennsylvania last year. Governor Ed Rendell signed into law a bill prohibiting the Reds in local government from offering free Wi-Fi throughout their municipalities. The action came after Philadelphia, where more than 50 percent of neighborhoods don't have access to broadband, embarked on a $10 million wireless Internet project. City leaders had stepped in where the free market had failed. Of course, it's a slippery slope from free Internet access to Karl Marx. So Rendell, the telecom industry's latest toady, even while exempting the City of Brotherly Love, acted to spare Pennsylvania from this grave threat to its economic freedom.
The specific problem here is that, as one of the letters in the Philadephia register link pointed at above explains, it seems like the local politicians are less than competant - hence the law that Lessig argues against, by specifically grandfathering in the Philadelphia project, in fact ends up permitting a city who seem unable to organize a pissup in a brewery to deploy broadband while forbidding anyone else to do so.
The problem I have with Lessig's argument is that a municipality provided service is likely to be less efficient than a private enterprise and, perhaps more importantly, is highly likely to skew things so that (for example) user security is weak and available bandwidth low but yet neither will be so bad that it is worth a competitor setting up a reasonable premium service. Of course it is also highly likely that the service will be better in some neighbourhoods in town than others - I recall Chicago friends of mine telling me that republican wards only got snowplowed after the democratic ones were clear - and one suspects that a similar maintenance attitude will apply to this service too. Now I'm not saying that all public services are badly run - the commune where I live in France is very definitely an honourable exception, but the surrounding municipalities do show that in that municpal authorities in France are as corrupt and self-serving as those anywhere else. The problem is that the elected officials do not as a general rule get paid to run services efficiently - indeed they have a fairly strong incentive to pad them out so as to employ supporters - which means that, except in rare cases, municipal services are low quality and expensive. We really don't need internet access to descend to this level.
On the other hand boradband access is, in many ways, one of those things that is a classic natural monopoly at least at the basic fiber/copper layer. Towns don't have two sets of water pipes running down the street, or two sets of electricity and so on and boradband is not much different in that having two providers covering the same ground results in a wasteful duplication of effort for little benefit. While local municalities are frequently inefficient and sloppy, large monopolies are frequently just as bad at providing a service when there is no competition. The great thing about broadband at present is that in many places there are two alternatives, cable and DSL, and as a result it is possible for subscribers to switch. Unfortunately in the poorer sorts of areas that are the target of the city plans, it is frequently the case than neither the phone company nor the cable operator is willing to provide affordable broadband because the required investment to upgrade exisiting infrastructure is unlikely to be repaid by the handful of people paying $9.99/month for internet access.
To sum up: we have a natural monopoly service that is fairly attractive to potential providers and which could be provided by a municipality just as well as by a private body so we have a bunch of lobbyists for telcos getting politicians to pass laws to stop other politicians from setting up a service that will probably be highly inefficient but will compete with the telcos. I'm sure there is a moral in this somewhere but I don't really know where.