There's also a town in Colorado, I think, where a wealthy guy leased some trunks, created his own central office, and set up wireless access points so that everyone in the town can get free wireless internet.
I know alot of countries governments give large grants to telcom companies to wire the country, but I've never heard of free, government run internet service. I think Iran and China might offer free, heavily censored internet to their people. I wouldn't expect the speeds to be too great. Japan might also offer free internet in large cities, such as Tokyo. Infact, Tokyo is completely wired with fibre optics from what I hear.