Hence regulation.
or is, due to a long history of regulation and government involvement, inhibited
And this is really begging the question, in the fallacious sense.
Where does this "bureaucratic layer" argument come from? The only telcos that are going to be burdened by these regs are ones who are already doing shady stuff. In other words, the ones that need to be.
And on a more visceral and arational level? Fuck 'em. Fuck Comcast, fuck Verizon. They had years to get their house in order, and it wasn't regulation preventing them from doing so. It wasn't regulation that gives Comcast the worst customer satisfaction scores in the entire industry. It wasn't regulation that made Comcast's "capacity" problems magically disappear when Google Fiber shows up in the same city. It wasn't regulation that made Comcast acquire and abuse what amounts to a monopoly position. It wasn't regulation that made Verizon run what amounts to a protection racket on Netflix.
Nobody put a gun to the CEO's heads and said "be the biggest bastards you possibly can" - they managed to do that quite well with minimal government involvement.
Perhaps this market warrants a different approach because it's demonstrably broken and because the internet is more akin to infrastructure than a consumer good.
There's a comparable argument against democratic government somewhere in there.
I think it's the same thing with the "free market". The general concept is sound, but there are corner cases that must be addressed. Infrastructure, I would argue, is one of those.
According to mainstream Western theory (as I understand it), even aspects of policy which are not directly democratic or even routinely voted on by elected representative, like the Constitution, are justified as having legitimate authority because they are consented to by the governed.
In other words, even those "additional regulations" you mention, which I assume include things like basic human rights which are supposedly not subject to reversal by normal voting, are included in my broad usage of the phrase "democratic government."
That's because whoever owns the land the infrastructure runs through can block progress, and the free market solution of competing elsewhere doesn't work. Land access is inherently limited by real world access problems that don't obey free market ideology.
A free market for public utilities would start from the public, i.e. government, OWNING said infrastructure outright and then allowing private corporations to lease the right to use it to provide service. Only the government has the legal right to eminent domain so it can build roads and public utilities and generally seize land for the common good - private corporations would have to negotiate with every landowner whose property needs to be crossed, and that is obviously unworkable in the real world.
From the current situation - which is a hodge podge of municipal services, private corporate services, agreements that limit competition, coupled with land access needs only eminent domain can provide - the only way to arrive at this paradise of "free market competition" is for the government to nationalize the entire thing, void all contracts with private service providers, and recreate the rules to allow competition among service providers by renting/licensing the infrastructure that is owned by the public. Otherwise it would take decades for existing agreements to expire or be renegotiated, and any improvement still have to rely on access and easements and various forms of eminent domain anyway.
I cannot imagine the unending howling of the libertarian-type crowd if this were to happen. They complain that various governments have created this situation (municipalities giving exclusive deals to cable providers) but government power had to be there in the first place or there wouldn't be any infrastructure at all.