The simplest case is that they aren't required to upgrade. The slightly less simple case is that, like with phone service prior to 1984, regulators set upgrade targets based on information provided by the companies. In the first step, the second case is exactly like the first: a rational actor will blow smoke at regulators trying very hard to avoid significant upgrades (because further investment in upgrades by definition reduces their ROI in a defined-profit model).
When it becomes clear that some upgrade will be needed, the same calculations apply to the marginal cost of different upgrade options. The difference between a $10 million upgrade to the copper vs. a $80 million switch to fiber is $70 million, and far more risk. As above, the extra $70 million and extra risk is a bad thing for the company, so they should fight to only do the $10 million upgrade. In other words, choosing between a $10 million upgrade and a $80 million upgrade is exactly the same as choosing between no upgrade and a $70 million upgrade: a non-stupid company will spend as little as possible, and risk as little as possible, because either way the get the government-mandated profit. Look at the history of (minimal) AT&T service upgrades during the decades they were fully regulated.
Contrast this with removing the government mandated monopoly, in which case a $80 million upgrade will allow the ISP to offer service with 10 times the speed of their competition, resulting profits increasing by $180 million.
Further, consider these two sets of choices:
Compete.net has $80 million to spend on upgrades. They can either spend $80 million on fiber, or $65 million on fresh copper.
If they buy fresh copper, outages will be reduced, increasing profit by 2%. If they buy fiber, service will be WAY better, increasing profit by 50%. Acme should of course spend the money on fiber.
Regulated.net must spend $80 million on upgrades. They can either spend that $80 million buying fresh copper or spend it on fiber.If they buy fresh copper, profits are unaffected. If they buy fiber, profits are unaffected. If they buy $65M worth of copper from the CEO's bother-in-law for $80M, there's an extra $15M profit to the company run by the brother-in-law, to be shared with the family.
Regulated.net doesn't CARE that they've wasted millions of dollars by essentially giving it away to friends and relatives - their profit is the same either way. In Compete.net tried the same thing, shareholders would be in an uproar and their CEO would soon be sharing a jail cell with Bernie.