First off, my modem I bought is still exactly the same speed as when I bought it. Bandwidth and speed don't increase automatically, they increase when large amounts of money are spent to upgrade old equipment. What's wonderful about technology is that the amount one has to spend to get an increase might not go up, and might even go down. But there's still spending.
The cable companies aren't withholding bandwidth. It's that they're not making big new investments to take advantage of technological advancements.
Second, technological advancement makes the government option even more difficult. I want something close to the current technological limits. However, while 90% of the population might have wanted something close to that limit 10 years ago, with each passing year, the average user needs (and more importantly, what they're willing to pay for in their taxes) only goes up a little bit. This means that meeting my demands becomes more of the technological elite such as myself demanding that the average tax payer pay for increased bandwidth they don't want.
Also, I'm not sure that government could withstand the pressure when inevitably bad things are done using the Internet. Suddenly it becomes "bad things are being facilitated by the government". There's already pressure on governments to "do something" whenever the Internet is a conduit for bad (not necessarily illegal) activities. How much worse does that get when the government is seen as an active agent in the perpetration of those activities. I can already here the demands that government "get out of the porn business" or "stop paying for pirates" with mandatory controls, or at the very least less bandwidth (since according to the news, what would people use all that bandwidth for except piracy and porn...)
I'm just not certain I'm happier with my Internet controlled by the median voter than I am with it controlled by a corporation.