That is not how it works here. Municipality owned fiber is common here in Sweden (called stadsnät). Often several smaller municipalities join together and co-own the venture.

A common variation is that they just provide the physical infrastructure and you can then select which ISP to use on top of the fiber, from a list of about 15 or so usually. This seems to work fine in rural Sweden, so I don't see why it wouldn't work elsewhere.

As to potholes, that is not a big problem? It is usually a larger problem in the cities than out in the countryside.