Dianah Neff, the CIO of the City of Philadelphia, has written an interesting article on municipalities and WiFi for CNet.
Philadelphia had ambitious plans to provide WiFi citywide until Verizon jumped into the discussion and got the Pennsylvania legislature to pass a law requiring municipalities to ask Verizon's permission before going into the service business (Philadelphia was exempted, but the whole debacle put the brakes on Philadelphia's effort).
Neff puts her finger on what I think is an essential truth in this whole dust up:
For all the money they've spent lobbying against municipal participation, they could have built the network themselves. The truth, of course, is that the incumbent local exchange carriers want unregulated monopolies over all telecommunications.
Bingo! The article is worth a careful read.