Yes, this is the model that makes the most sense.
It closely parallels the road system -- government builds the roads, but they don't deploy commercial services on the roads themselves -- ie, they don't get into the taxi business, the delivery business, etc.
I think it's telling and strange that they complain about this. For one, it says that they are less profitable on actual services delivered over the wire because when faced with competition where pricing is solely determined by content and not delivery.
Strange, because I would kind of expect that physical plant maintenance would be expensive. I see Comcast trucks all the time, which assume at least some percentage of involve physical plant work. If a city put in municipal fiber Comcast could connect subscribers to, I would expect that they would be thrilled to dump a shitload of plant maintenance overhead.
And at some point in the future, I would expect both competitors running fiber to the home and signaling limits on coax cable to render coax plants non-competitive, meaning that cable providers are sitting on something of a timebomb of aging infrastructure which will be very costly to upgrade.
I've often wondered if a smarter strategy for cable providers might not be offering to sell their municipal wire plant (coax to the house plus fiber distribution network) to municipalities. The cable company could spin off an independent plant management company which would actually run the plant -- I would expect any municipal plant to be managed under contract by a private entity anyway. The municipality gets an instant network to homes plus fiber distribution without having to do any construction and the cable company unloads a physical plant which will need a long-term investment to remain viable.