Well this is how it happend in Romania:

-----------------
2000 - 2002

There was NO regulation. We just threw UTP cables from building to building, and bought external connectivity from bulk sellers.
We didn't pay any taxes. We didn't have any signed agreements with "customers". We didn't have any permits from the city council either. There were no employees... heck, we weren't even registered as a business.

We just threw UTP cables through the city like it was in our own backyard. The only problem was after thunderstorms, when there was a shortage of switches to replace the burned ones :) Oh, and from time to time I had to call some customer's mom to ask her to reset the stuck switch hosted by her kid, because half the network couldn't connect to the internet.

Users paid about $10 for 100 mbps connectivity with other users (multiplayer games and movie/mp3 sharing) and 64 kbps internet access.

Basically we were just some highscool/college kids building a LAN, and every user paid a share of the costs. My network had about 200 subscribers and covered a 2x2 km area. Several networks like this one were scattered throughout the city. Every month a couple of new networks appeared, while others bit the dust (including my own).

-----------------
2003 - 2004

(By this time me and my friends lost interest in being a "pseudo-ISP", so I can only speak from the POV of a customer)

Networks with 100-300 users began joining together forming networks of 1000+ subscribers. Companies were formed, real sys-admins were hired. Some backbones were now built with fiber optics.

Big companies noticed this and started to complain in the mass-media, calling such networks "illegal". Well, they were partly right (nobody gave a f#ck about building permits and taxes).

Now users paid $10 for 100 mbps connectivity with hundreds and even thousands of other people, and 256 kbps internet access. Big telcos were barely able to offer 128 kbps with a monthly traffic limit.

-----------------
2005 - 2008

Big telcos stopped complaining and began building their networks. Then increased their networks speeds, removed the FUP, offered subscriber packages (phoneline + cable + internet access). For $10 you could get a landline and 5 mbps internet.

A lot of city "LANs" couldn't keep up with the big guys and crumbled. Others joined forces and became real ISPs (with tech support, tax payments, ...) and some even managed to obtain money from investment funds. They could still compete with the main ISPs because they offered much better tech support, and the 100 mbps LAN speed was still of huge interest, even if the internet access was limited to 1-10 mbps.

-----------------
2009 - 2010

Small ISPs begin implementing Fiber to the Building. Hello Gigabit (well, 1000 mbps with others subscribers only... the internet connection is limited to 20-30 mbps).

Big telcos buy more and more small ISPs, but also continue to improve their infrastructure. Some drop the old cable (with its DOCSIS modems) and begin implementing Fiber to the Building too.

-----------------
Today

For $10 per month you can get 100 mbps internet access + 5GB of mobile 3G connection. My ISP started installing Fiber Optics to the home (GPON technology) for houses and continues installing Fiber to the Builing (and UTP from there to your apartment) for high buildings. They also began installing WiFi access points through the cities (free access for all subscribers).

-----------------

IN THE END, I WOULD LIKE TO THANK THE ROMANIAN GOVERMENT FOR NOT INTERFERING.
And if the large companies will try to form monopolies, I'm sure new ISPs will appear. I don't care about regulations. Thank you.