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We had something similar in my city. Basically, we started building a broadband network, then our state legislature blocked new municipal service (we hadn't turned it on yet), so we were forced to sell it at a loss (we've almost finished paying off the debt). I have service from the new ISP (only offers service in my city), and it rocks, but has limited max speed. The laws changed, so we're trying it again.
I understand the high level complaints here because municipal ISPs could simply move costs to taxes to undercut competitors, but that argument falls flat when you see how private ISPs do exactly the same thing, but with lawsuits and promotional deals instead of taxes.
So I'm 100% in favor of municipal broadband, but I can see having some regulations there such as: