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There are tons of options
1) municipality builds the network itself instead of granting a franchise...
This is the best, and most 'efficient', option.
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...2) multiple firms get licenses ([Shame Trolly !!!1!] thinks this is impossible...)...
LOL no, I haven't said anything close to being anything like this. I can't even imagine how you can imagine that I did.
This is the third best option. BTW, the same big business $$$ lined up against #1 is equally lined up behind #2.
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... 3) separate network infrastructure from content delivery service... see: Enron...
This is functionally the same as #1, except that the city outsources the operation of their municipal network. In practice the city would put out for bid a monopoly franchise, but that franchise would be for a open-carrier network than any ISP, CATV,etc. can 'plug into' on even footing.
This is the second best option.
BTW, this was part of what happen during the infamous Cali electrical deregulation. The sound part (as far as it went). Transmission was separated from generation. For a while you could buy your electricity from multiple generating vendors. But regardless of who generated the electricity you bought, it was transmitted wholesale by a private monopoly, and transmitted retail by either a city without a franchisee (ex: LA, Sacto), or a monopoly franchisee (ex: PGE, SDG&E).
Enron, etc, gamed the flawed other parts, the 'market' and 'spot' parts, of the overall deregulation scheme.