competitive market > govt control > uncompetitive market
to be more realistic, there's overlap at the ends of these - you can find some local govts that outperformed competitive markets and some uncompetitive markets that outperform local govts, but on average, the above generalization works.
The real pain is that all the incentives that make capitalism work well ALSO incentivize finding ways to break the market, so a competitive market won't stay competitive forever just by existing.
Certainly. If we consider "competitive market" under the same rubric that you proposed: "areas where occasional failure and/or occasional required provider changes are tolerable", it clearly fails that test. So we can probably say that ensuring a stable, competitive market may be a government's responsibility.
Public telcomms were the norm in most of the world (sans US) until the 80s-90s. It wasn't good.
What an ISP is is customer support & infrastructure. These sorts of ideas make ISPs less infrastructure, more customer facing services.
Btw, this is not some untested theory. It's been done a bunch of times. Work's well enough, done right.