I don't think a government run utility would be better than what we have today, and would likely be worse. What would be better? What should have been done in the original 1996 laws:
Force the telcos and cable companies to break up.
Really, it's as simple as that...
The main problem with the current situation is that there is near-zero competition. At best you have "competition" between two ILECs (cable and telco). In some cases they will "lease" their lines to competitors, but who wants to be in a business where you're the customer of your main competitor? That's guaranteed not to go well.
So in my "dream" solution...
Last-mile providers would be a regulated monopoly (duopoly I guess in the case where there is both twisted-pair and coax) that would just be in charge of the cabling and infrastructure between actual customers and the "central office". They would then lease the lines to "dialtone" (bandwidth?) providers at rates set by the local public utility commission, but would be barred from providing any content on those lines.
That would set up the situation such that multiple companies could compete based on the services that they could provide to customers and price.
I'm not holding my breath for such an outbreak of sanity though... ;)