Comcast and AT&T Respond to the Dawning of Fast Internet (It's Still Not from Them)

No matter which of the huge Internet Service Provider (ISP) giants you give money to every month in order to be able to access the world's biggest database of cute animal photos, you've probably had problems with them. Speeds don't improve, and, worst of all, customer service sucks. 

However, a (relatively) brand new yet familiar player is coming on the scene: Google Fiber. Google Fiber uses fiber optics, or glass/plastic threads, to transmit data, as opposed to the metal wires that are used by most of the United States. The project boasts up to 1 gigabyte/second download speeds. For context, the national average is estimated by Google as being at around 10 megabytes/second. That's 1000 times slower.

What's really interesting about this topic, though, is the reactions of Comcast and AT&T, neatly summarized in the picture below:

A letter from Comcast to citizens in Atlanta, Georgia,
where Google Fiber is being implemented. (source)

Also, in Huntsville, Alabama, where Google Fiber is also on its way to implementation, AT&T and Comcast have both promised (eventual) 1 GB/s speeds.

This seems like a classic case of the market correcting itself–these companies had a powerful hold over the industry that was leaving consumers frustrated with the product and the accompanying services, but a new, entrepreneur company has paved the way for better service everywhere, and now the big companies are trying to keep up.

But is it?

Keep in mind that not only have these companies have had their unspeakable power for a (relatively) painfully long while, the "entrepreneur"company is a well-established Silicon Valley giant.

So does this example serve the idea that the market corrects itself by way of the invisible hand, or does it decry a completely free market that allows such dominance of the few? What role should the government be taking? Also, what are the possible benefits and detriments of having a service like Google Fiber in your city? (It should be noted that Google Fiber is on its way to San Francisco).

Extra credit (not really): Propaganda–what do you think of its use here, not just by Google Fiber's opponents, but by Google Fiber itself?

Sources:
https://www.techdirt.com/articles/20160222/09101033670/google-fiber-expanding-faster-further-making-comcast-very-nervous.shtml
http://www.webopedia.com/TERM/F/fiber_optics.html
https://fiber.google.com/about/
http://www.al.com/news/huntsville/index.ssf/2016/02/what_do_att_and_comcast_have_t.html
http://arstechnica.com/business/2016/02/as-google-fiber-hits-atlanta-comcast-says-dont-fall-for-the-hype/