The Universal Service Principal is hardly a common concept yet there is the capability of other countries to allow competition both at an infrastructure and access level. I think you will also find that there is absolutely no USP for internet access above an abysmally low level.
I'm not even sure how this is relevant. In other countries, they throw acid in the face of women who do not cover their face and execute gays. What do we learn from this? Other countries do things differently and some things may pass as appropriate but it doesn't mean it will here.
And no, I'm not comparing torturing women or killing gays to giving away the internet, I'm saying that their structures are different, their governments are different, so what they do doesn't always line up with ours.
More fundamentally though I do not understand why you feel there should be no competition at a municipal level. A township has no requirement, legally or morally, to support a different township through subsidisation. And that is exactly what you are arguing by saying the cash cows need to exist to fund other areas. If a local government feels that its population is being inadequately served then it actually HAS the moral imperative to fix that if it can. Now if it invests in infrastructure which it then operates itself or sells to a private entity and as a result improves the standards for its constituents it has done EXACTLY what it exists to do.
Wrong.. The federal government as well as the local government have given these companies monopolies specifically in order to support different townships. It is all regulated at a government level and these companies have published rates on file at their state public utilities commission.
Now, by fixing it, you are correct. It is the duty of the local governments to impose rules that fix the broken monopolies and force them to invest in new infrastructure is that is necessary. And when they do, there is usually a rider placed on the bills like when one city decides that all their utility lines must be moved under ground (which is becoming a common occurrence today). So the city, and/or townships (in my state, they are two different things) can and should fix the problems. They just don't need to have the government competing with an entity it already controls and taking the low hanging fruits and sticking those entities with the more expensive clients.
Imagine if you owned a business that sold gasoline. You have a cost you have to recover. Now imagine the city stepping in and underselling you and using tax payer funds in order to do so. But while the city is not subject to it's own taxes, you are and while the city doesn't have to jump through regulatory hoops, you do. So what would you think about the city all the sudden driving you out of business with tax payer funds?