This suggests to me that a little more regulation might be helpful -- but you seem to be suggesting that the lack of competition in the local phone market is actually due to some vestiges of government regulation of the industry -- or am I misunderstanding?

An example of the type of special-interest driven regulation presented as consumer protection that I'm talking about is the established phone companies trying to use the E911 regulations to hamper VOIP companies that threaten their monopolies. This type of regulatory capture is very common.