I meant to imply what you call the "more mainstream free market argument," though I think it is now the standard view of people who study this stuff. The question is "harmless compared to what?" Conceivably, a regulatory environment in which all-knowing and benevolent bureaucrats costlessly implement and enforce regulation would outperform a laissez-faire approach to natural monopoly. But Hayek won the Nobel prize for showing that government is not all-knowing, and Buchanan won it for showing that it is not benevolent. It's not useful to judge natural monopoly against an alternative that does not and cannot exist.
Compared to the relevant alternatives, natural monopoly is basically harmless.
Compared to the relevant alternatives, natural monopoly is basically harmless.