There are many solutions to that. The EU solution is to require all member states to regulate local loop unbundling, so any provider can rent access at regulated rates to connect their equipment at the local exchanges and get a raw connection to the subscribers.
How exactly you manage the company that owns the last mile infrastructure can greatly affect how well this works, but even in the UK which has done this quite poorly, there are pretty much no place where you can't pick from dozens of ISPs.
It still imposes limits as to the maximum capacity, based on the upgrade schedules of OpenReach (BT) which controls the phone/adsl network. There are some problems. E.g. due to the way regulation is structured in the UK, BT frequently gets accused of milking OpenReach for money rather than invest in upgrades at the pace they ought to (basically because they earn far more from OpenReach than from their own ISP). One solution to this type of problem would be to regulate dividends from the line operator so that there is a limit set based on the amount invested in upgrades to make it pay to reinvest and/or to allow them a higher profit margin on upgraded services for a period.
OpenReach's wholesale prices are regulated roughly based on a cost+ basis, and are open and published on their websites for everyone to read.
Overall it does mean the ISP market is quite competitive, and entry costs for new ISPs are guaranteed to be relatively low, as e.g. there are "backhaul" services available that allow an ISP to get a connection to one or a few points in BTs network and have them hand over IP connections to subscribers at that point rather than having to do local loop unbundling across the country.
How exactly you manage the company that owns the last mile infrastructure can greatly affect how well this works, but even in the UK which has done this quite poorly, there are pretty much no place where you can't pick from dozens of ISPs.
It still imposes limits as to the maximum capacity, based on the upgrade schedules of OpenReach (BT) which controls the phone/adsl network. There are some problems. E.g. due to the way regulation is structured in the UK, BT frequently gets accused of milking OpenReach for money rather than invest in upgrades at the pace they ought to (basically because they earn far more from OpenReach than from their own ISP). One solution to this type of problem would be to regulate dividends from the line operator so that there is a limit set based on the amount invested in upgrades to make it pay to reinvest and/or to allow them a higher profit margin on upgraded services for a period.
OpenReach's wholesale prices are regulated roughly based on a cost+ basis, and are open and published on their websites for everyone to read.
Overall it does mean the ISP market is quite competitive, and entry costs for new ISPs are guaranteed to be relatively low, as e.g. there are "backhaul" services available that allow an ISP to get a connection to one or a few points in BTs network and have them hand over IP connections to subscribers at that point rather than having to do local loop unbundling across the country.