Oh, I see the problem. You think local government owns the telephone poles. Nope. The *electric power company* (or sometimes the phone company) owns the poles. It's not the gubmint, it's a single private company with the power to control who gets to compete, because it owns the poles and there's no room on the street to put in more.
The government use right of way laws to force private land owners to have telephone poles on their property, they did this as the poles were for a common good. The right of way laws allowed telephone, cable and power companies all access to the poles but not ISPs. Essentially they allowed a third party confiscate property and only forced them to share with two other groups as a condition of letting them confiscate it. Then a third party comes along and can make the same common good argument but was not granted right away access.