I don't disagree with these ideas about the importance of community media for expanding the Internet, but if you focus too much on the media, you miss that what brings people online is really the community.
The better analogy is the telephone, rather than cable television. The value of the phone is not that you can hear a local call or a long distance call, but that you can both speak and listen. The difference with the Internet is that you can speak and listen in multimedia, as an individual or as part of a group, in real-time and on delay.
This is the basis for how People's Production House and many of our peers like Media Mobilizing Project and Media Alliance approach digital literacy. A lot of computer literacy programs just teach people how to use the computer to consume media and some, like One Economy's Beehive, provide locally-specific content, but that's like giving someone a phone and just teaching them to pick it up and listen. Regardless of whether it was a local or long-distance call, if that's how people used the phone, it would make the whole network a lot less useful for all of us. Just a lot of folks sitting quietly with a phone in their hands.
This is also why symmetric Internet connections are so important. DSL and cable connections are like a phone where you are permitted one word to the other party's five words. Who would sign up for that?
The analogy continues: You wouldn't expect people to start using the phone if they could only ever speak and listen to people who use a different language or only want to talk about sports when they want to talk about cooking. To expand the Internet, you have to engage communities, not individuals. I hope this is what we can accomplish with the newly-available federal funds; the statute certainly seems to recognize this value, as you said.
At it's best, PEG does all of these things, but we're forced to shoehorn them into a system that was designed for one-way distribution. Undying gratitude to everyone who has done that shoehorning and continues to do it, but I hope we can be more ambitious with the Internet.