That way ISPs can continue to compete for your business, but the market would be significantly less restrictive because the ISP only needs physical equipment at the data center and upstream of it.
The biggest thing stopping ISP competition today is that local markets don't want the road dug up ten times to lay different cables. So instead lay them a single time, and re-sell access.
The ISPs would pay a fee to use the government cables from the data center to the end user (and equipment). That fee would be used to expand and maintain the network.
Other countries have done this with huge success. It wouldn't even put ISPs out of business, they can use this network just like their competitors.
Edit: A colleague just mentioned to me that New Zealand doesn't have net neutrality and doesn't need it for this very reason.
Are there any single major companies that owns the backbone? And Submarine cables?
Crown Fibre Holdings owns the new fibre network (I think Chorus owns all the copper, not sure) but Chorus manages most of it (by contract); Chorus is a crown partner company, and they are regulated and forbidden from certain activities - they were split off from Telecom, a private company.
I don't know enough about the backbone to usefully comment, except that there are at least 3 fibre networks running along the major road I live near.
For a long time there was only one submarine cable with any serious bandwidth (Southern Cross Cable), but aparently according to Wikipedia a new one to AUS was rolled out in March 2017 and another one to Hawaii this month.
If you look at EPB being forced to pull out of neighboring areas and the actions of other states to prevent muni / utility Internet projects, it's pretty clear that America doesn't want to solve the last mile problem unless it involves preserving the incumbent's market position.