Re: Once again...
When the "free market" doesn't work, you subsidise or regulate to address the issue. The argument then becomes how much you should interfere.
Rural communities aren't getting satisfactory services compared to urban areas and are steadily falling further behind as newer technologies cannot use (due to distance) the historically subsidised copper network, so there is a clear argument for subsidies to offset the full cost of providing services to customers.
And who can improve the services for those that the government wishes to subsidise? The government has already sold the utility that used to do this, so the options are to setup a new utility or purchase services from an existing utility company. As long as the process is transparent and can be shown to provide value (it's BT/Openwound so or very small values of good...), it is likely to be at least as good value as the alternatives.
How would this work in your alternative universe?