As it stands, if, say a city tries to band together and make low-cost high-performance municipal internet, the existing companies will sue to maintain their monopoly.
Did you read that before you hit submit ? If you're pro-regulation that's fine and if you're a free market fanatic that's fine too ... but what you wrote is just pure gibberish.
The free market only efficient under certain circumstances: when transaction costs are small and when there are few barriers to entry.
One well-known form of market failure is the "natural monopoly", and one form of that applies here: the geographic monopoly. The barriers to entry for a new ISP may be quite large, if significant investments in physical infrastructure which must be made before the ISP can operate. (One can also intuit that having multiple physical telephone networks connecting to houses in the same neighborhood would be wildly redundant.)