Legally, only one ILEC is allowed to run copper pairs to my property. They have no interested in upgrading their plant.
They have a protected monopoly.
In many jurisdictions, only one cable company can put coax in the ground.
They have a protected monopoly.
IP protections, like copyright, are a government protected monopoly.
Frequency allocations, overseen by the FCC, are a government protected monopoly.
Access Easements on private property for incumbent wire owners (e.g. the cable company can put a truck or a box on your property if they like) are a government grant of special privilege.
Given all of the government collusion with the current infrastructure, asking if government can address its own problems seems a bit silly. Of course it could. It could stop enabling all of the stuff it currently enables, for one.
If you try to factor the residential broadband problem into an OSI-type layer model, perhaps what makes sense is to limit vertical integration.
E.g. if there is physical plant, IP transit, content delivery, and content production, it would be problematic to allow, for instance, SONY, to own all 4 of those layers in some specific area.
Ideally there would be robust competition at each layer.
Another action the government could take would be to stop approving merger/consolidation deals that have the net effect of consolidating layers and/or markets in such a way that overall marketplace competition suffers.
In some communities, public utility ownership of layer 1 (physical plant) would make a lot of sense and would be voter supported. In others, it wouldn't, and wouldn't. Both models are worth trying.
As you go up the stack, there are lots of opportunities for different business models. Community owned IP transit? Why not? This is, in some regards, the case at current internet peering points. The members co-own the exchanges. It is in some respects like the agricultural co-ops that are so common in rural America - the land of rugged individualists.
People are, after all, not opposed to working in groups when they like the group and when the cooperation makes sense (as opposed to being coercive in nature)