Earlier quoted context omitted.
I think there's a simple solution - municipal fiber everywhere with companies allowed to lease access. Internet access looks like a utility and quacks like a utility, so it should be treated like one. The timeline for breaking even on the investment has been pretty reasonably short in the examples I've seen.
The municipalities have no money to build, and more importantly, to maintain and continually upgrade, such networks. Heck, they can barely maintain utility systems that evolve far slower than internet connectivity: power and water. See: http://www.nytimes.com/2009/04/18/us/18water.html?_r=0 . People outside of HN won't be anywhere near sufficiently eager to earmark sufficient public dollars to properly maintain such…
I would expect that the buildout could be funded by a municipal bond issue, with the repayment being handled via the revenue from the customer-facing companies that lease access to the infrastructure. I've heard of municipal networks like this being run profitably and being repaid in a reasonable timeframe (on the order of a decade or two), but unfortunately I don't know more than that.