I think that Internet should be part of infrastructure of a country and Govt. should pay for it same like they do for roads, railway and other utilities.
Value add services can be provided by Service providers. There are a lot of success stories for Service providers buying a wholesale infrastructure service and doing retail to the customer. In this way a service provider can really concentrate on service and customer instead of infrastructure.
This also provide fair open market for main telco companies without going in to regulatory problems of monopoly.