You haven't been in many internet arguments about economics, then. There are a lot of us who think that various targeted types of regulation and government market participation can actually lead to better markets. I'm not sure it's the case this time, but the general sentiment is common.

It depends on how you define "free market", exactly. The definition that is popular nowadays originated with libertarians, and equates it with lack of government regulation, regardless of anything else. But the traditional definition also includes monopolies and other factors that stifle competition, and from that perspective, it's entirely possible for a market to be more free because of government intervention (e.g. monopoly busting).

Indeed, setting certain rules can unify a market and reduce transaction costs. Calling a city, negotiating for rights to use public property, etc.

Setting caps can also reduce a municipality desire to give a 'monopoly', an absolute monopoly where you can't get comparable service elsewhere, to one provider in exchange for generous royalty rates.