Unfortunately modern Capitalism begs to differ. Inevitably one company will get enough market share and the resources to just buy out competitors. Over a long enough time line without intervention they will own just about everything. A good example is the Telecom situation in the United States. ~40 years they broke up a "monopoly" and now we have somewhat of a duopoly (which is present in most markets in the US now rather than monopolies). Without regulation capitalism inevitably leads to monopolies and over a long enough time line you'll end up with mega-corporations controlling huge sections of the United States.
The state is the progenitor of monopolies. Your example is actually one of the better ones. The federal government gave AT&T its monopoly and signed an agreement to preserve this status quo that lasted 71 years. The early years of the telephone had most major cities with two providers or more. And then despite not just anti-trust laws, but ICC regulations, not just allowed but encouraged AT&T's purchase and elimination of competitors. The FCC did the same thing with TV. Old timer airliner people are still pissed about Carter and Kennedy teaming up to deregulate their industry and increase democratic access to air travel.
Regulation has grown by leaps and bounds over the last century. Of course larger and larger corporations are forming. That's the entire point as an infinite number of small operators can't be made into allies as easily. And there's less of a place for the iron triangle. Nothing has been regulated and re-regulated over the last 25 years like the health care and financial markets and what's happened? Greater and greater centralization and monopolization. The two latest pieces of legislation on these creates even greater incentives. The ACA will lead to fewer larger and more powerful insurance companies and Dodd-Frank is leading to fewer larger and more powerful banks and financial institutions. (Both will fail the masses, while a bunch of cronies get fatter and the state will "rescue" us by assuming control so it's win-win in the end. Except for all the people who suffer but fuck them, they'll vote regardless.)
Absent a foot on the scale for the status quo, a monopoly can't form and prevent competitors while also not benefiting customers because nature is dynamic and ever evolving. The state despises this because it dethrones old elites and when new elites like Microsoft pop-up, the state has to then use its force to get them to buy into the extortion racket so that followers like Google understand from the get go.
Inevitably one company will get enough market share and the resources to just buy out competitors.
If it's inevitable, what explains markets where it doesn't happen and there isn't extensive government anti-trust regulation in place?
The reason why the government takes over control of certain things, is because they aren't fields where profitability should take precedent over the service being offered.
Yet, pretty much every government operation does this. They almost always intentionally target the most profitable fields because that's power outside of its hand. Look at governments the world over deciding that they need to "protect" the internet from profit by just implementing a few controls, maybe a filter or two, and so on.
Look at fucking Pemex and its priorities.
Look at Private Prisons, the conditions are almost always terrible, and there are thousands of horror stories about them. It's easy to write off criminals as not deserving a luxurious living, but in most situations they are denied basic services as cost-cuting measures.
This is hardly exclusive to private prisons. State prisons have long been barbaric. I think it's something inherent to prisons, somebody should study that.
The road system is another example. If we had privitized roads you wouldn't be able to drive anywhere without ponying up everything you own.
Why would you assume this?
Indeed the government roads system contributes to the large corporations we were just lamenting. Walmart is massively subsidized in this manner. Then there's the fact that a private company couldn't steal the property of the poor and minority through eminent domain to build highways to nowhere or roads to Walmart as has happened to millions. It can't wipe out entire neighboorhoods in return for nothing like in Black Bottom or as with Kelo. Plus a private company has an interest in maintenance and managing external costs the government doesn't since they get rewarded for failure.
Most importantly, we would haven't as many bridges and shit named after criminals like Robert C. Byrd.
There are millions of services that the government has offered that have been hugely successful and popular. Focusing on the low-hanging fruit is being disingenuous. There's also a massive image problem as has been pointed countless times with government programs. People were uneasy about Obamacare as a concept, but loved a majority of the provisions. People hate "government hand outs" but SNAP, Social Security, and Medicaid are hugely popular.
Would you accept McDonalds or Walmart running the planet or even a nation? If not, why do you accept or even want a much more vertically and horizontally integrated monopoly corporation to be given a captive market for its services?
But my "in theory, not practice" comment wasn't even related to this idea. It's been touched on a bit here, but in general, we just handwave away the horrific injustices of government in a way we don't for any other corporation.
If Exxon smashes a tanker into an iceberg and spills oil all over the ocean. It's blasted by everyone, it faces charges and liabilities (usually not strong enough ones), people are pulled before Congress and the media to be asked why the front fell off.
Defenses of Exxon by talking about how they provide your ability to drive or heat your home are properly dismissed.
Meanwhile with government we praise when it sets up a ponzi scheme to steal from the young and minority to give to old white ladies. We cry foul when anyone dares suggest our schools or roads aren't the best and our teachers and bureaucrats aren't the hardest working most noble servants.
The state has murdered millions. Deliberately. Also accidentally. It destroys wealth deliberately and accidentally. It holds back research deliberately and accidentally. It tampers in social relations deliberately and accidentally. But because a lot of this is "unseen" or legal, they get a pass. (And because we consider ourselves culpable in its actions. Actions that we morally oppose but have to justify somehow.)
How much wealth and environmental destruction have we suffered because of the states prevention of widespread nuclear power? How much wealth destruction and innovation has been lost to the states arbitrary imposition of regulations on small firms while looking the other way against the biggest players or fattening them up at lower classes expenses like the Fed did? How many lives have been ruined by the War on Drugs? Why does some young minority males engaging in unregulated transactions three times lead to life in prison but Angelo Mozilo doesn't even have to pay the full amount of his tiny settlement or spend an hour in jail? How much poverty has been perpetuated by the War on Drugs and the War on Poverty? Why perpetuate poverty and bureaucracy and inefficiency and political threats with the welfare state and tax system when a simple guaranteed minimum income and basic near-flat tax system is possible? How many people have died as the state deployed sanctions and violence at home and abroad in entirely unnecessary actions that serve for little other than displays of its power? How much have we wasted in security theater and military armaments?
I don't think the balance sheet adds up for the benefits. Not just annually but historically. Others probably disagree. It's intractable. But it's also win-win. I get to be right and they get to have their way.