I think the issue with what you're saying here is that you're assuming an ISP is going to pay the same amount that residential customers pay. They will ultimately pay several times more than what would the same amount of residential customers of your own pay. There is a general rule that you do not build fiber where fiber already exists. It is just that expensive. So if a city's fiber network is laid down first, ISPs typically will not cross those boundaries. They would rather pay for hand off as that is actually cheaper than building and maintaining the infrastructure.

One of the big differences between backhaul carriers and ISPs is the amount of actual personnel required as well. Backall carriers don't need giant call centers filled with customer service reps and residential techs. They don't need an army of field services to go out and install local services for residents.

Final point I can make to that is that regardless if it's an ISP or it's a city-based service, nobody builds fiber networks with residential in mind. When you build a fiber network you build it to businesses because the same service that you could sell to a residential customer you could sell to a business customer with a 10x multiplier on it. After you establish business services, you backfill residential. I worked accounts where one business client equaled 10,000 residential.

In the end, cities that establish themselves as backhaul carriers make more money for the city because they will cost less to build, less to maintain, and have the advantage of business billing.