The small city where I live managed to do the first scenario just fine. They did bring in several small ISPs (large ones deliberately excluded) to provide the actual routing to the internet, but the infrastructure is city-managed, and the project was completed on time and within budget.
It helps that our electorate is very progressive, and are not always pushing the City to cut expenses at all costs.
It helps that our electorate is very progressive, and are not always pushing the City to cut expenses at all costs.