Government granted monopolies are granted under oversight and regulation that would be extreme in any other scenario. Many of them don't even get to set prices. No discipline or market forces needed. The regulators just regulate predatory action.

In your example no one is going to dig a rival pipe because you can't just go around installing pipes under other people's roads and land. The permission to do that is granted to a single entity by the government, further reinforcing the natural monopoly. There is no situation where it is economically feasible to lay more pipe when you have no right to do that.