re: I don't really want dish service.
Well, if you don't want dish service, that isn't the cable company's fault.
My first response to your problem would be to get the city out of the business of deciding which company is going to be the "official" company. Forget "franchises." Remove regulations that dictate that only a selected and favored company can provide local service. Then step back. This would probably come under "encouraging competition" in your post.
There would be no need to go to "Step 2," which is to essentially "nationalize" the service, as though miraculously a service owned by a local bureaucracy (with no more competition than before) will deliver everything you want.