Should Erewhon be forced to operate equally in neighborhoods of different diversity - even if they clearly appeal to a certain type of customer?
Why should ISPs invest evenly / charge evenly if it doesn't make sense for them?
The funny thing about good business people is - they're usually more interested in making money than being racist (obviously there are exceptions).
Most places you have one option, and that is it.
IMO, it falls into the same bucket as other utilities - water, power, etc an should be heavily regulated to ensure adequate and reasonably priced access.
This isn't a typical consumer product you buy at the store where I'm worried that the government will be bad at responding to consumer tastes, what consumers what out of their internet access is extremely simple: fast and reliable internet, that's basically it. It's not something where's a lot of questions of exactly how and where to advance things and give different offerings, like a smartphone or brand of yogurt or whatever.
How many and which upstreams to connect to makes a big difference. What technology is used for the last mile access network makes a big difference. Who to peer with and who to let run CDN appliances in the network makes a big difference. Oversubscription ratios in various parts of the network make a big difference. Address policies make a big difference.
Now, if the municipality wants to run last mile and hand it off to whatever ISPs want to take it in some central locations? That makes the municipal job simpler: they just need to measure quality on their network, and anything that happens after the handoff to the ISP is not their problem. But that's a more complex product for users than a single provider to blame for everything.
You cannot have a targeted negative effect without mustache-twirling racists; what you have instead is an incidental negative effect. I discussed this elsewhere in the thread, but the "disparate impact" clauses of various civil rights legislation attempt to deal with precisely this -- cases when in the absence of any intent to discriminate along protected lines, nevertheless an outcome arises that impact those protected groups differently.
I posit that this part of civil rights legislation is fundamentally flawed, because it is basically not impossible that any policy or action, public or private, impacts all subgroups of a population in equal measure. Make a law regulating taxis? There's a disparate impact on men, who are 85% of all cab drivers. NFL negotiates player pay? There's a disparate impact on black people, who comprise over half of the players. Covid policies close ski resorts in Colorado? There's a disparate impact on white people, who are the overwhelming majority of both people who work at ski resorts as well as those who visit. In none of those cases is there an intent to cause protected groups to be affected differently, but they are.