The problem is caused by bad government, but the solution is good government, as exemplified by the BT story. A completely free market would lead to a monopoly in broadband anyways. The irony here is that the government is not doing anything to solve the problem.
Government getting the hell out of the way of people voluntarily interacting the marketplace is the best situation.
For example: cable easements. Get rid of them. Get rid of all easements. Without them, you would have a variety of options and methods of gaining access to a number of utilities (internet, power, etc) as well as new services that have not yet been created.
Easements and the monopoly they sanction are the reasons that everyone in an area can get service at all. If they had to write a private contract that would cover the absurdly high cost of laying cable, it would make a cell phone contract look like a love note. It would have to be a covenant imposed on every tenant of the building for many years. It would be just like regulation, only written by people with an immediate incentive to do it as abusively as possible.
Real-world markets lack infinite competition and perfect transparency, so they pretty routinely fail to deliver optimal solutions. Many famously wealthy people got there by exploiting strategies to make markets fail.
If no one enforces laws that prevent underhanded tactics in business, how is that a healthy market? And don't say that consumers would naturally avoid companies that collude together to raise prices or put lead in paint.
Specifically in this scenario, how could the British government remaining uninvolved with the BT situation have led to a better market?
You don't need government to do anything to end up with monopolies, especially in activities with very high cost-of-entry such as utilities or telecommunications.
Ma Bell became a natural monopoly all on its own, and barring an extremely disruptive entry into the market (which is, again, extremely difficult in high-entry-cost markets since the rate of new entry is so low) it will consolidate over time as the current incumbents reach the limits of possible organic growth.
