By this idiot "argument", government should go back to the 1950s through 1970s and start nationalizing railroads, power companies, and oil companies again. How did that work out again?
Particularly it should sell them to different car companies and arrange for them to have a monopoly. So the interstate is usable by anyone who pays but the local roads are GM only and the off ramp where you work is owned by Toyota.
The brownouts a couple years back were because the State deregulated only one side of the market, leaving the sellers of electricity in an untenable position. Essentially, they had to compete to sell on the one hand, but were forbidden from competition on the purchasing side. The problem was entirely (and it's not often one can point a finger at one single cause, but here it is) the fault of ham-fisted State regulation.
The federal rail system is not inexpensive, it's heavily subsidized. Don't start with the per-passenger-mile comparison to highways, because it's wrong: the study failed to account for capital cost in the railway, while counting for it against roads. On the topic of rail, the network of rail in the US was subsidized and built using eminent domain -- yet all of those railroads failed or were merged into others. The one exception, the one railroad that stood on its own without federal strongarming others into supporting it, is the only one that managed to survive until the present day.
On the one hand, you are talking about a program to privatize a previously-public program. That has nothing to do with the question of whether public entities should enter markets that are already serviced by corporate entities.
Indeed, if anything, it seems to me that your example argues against government getting into business, because of the danger of it being corrupted or subverted, as in your example.