If you were running a high street toy shop and your council came along to set one up next door, then proceeded to sell many of the same toys using salesmen poached from you by paying them £10k more, and then itl created an online ordering business to outdo yours, how exactly would you adapt?
One way would be to make your products more niche and better, but inevitably that means smaller, possibly to a point where a business is not sustainable.
As the entrepreneurial owner of that shop, would you not complain that it was just not possible to compete against a taxpayer-subsidised loss-making 'business'?
Yes, local newspapers are generally poorly run, but that does not excuse the public sector wading in under the auspices of 'communication obligations' by throwing away tax money on business models that defy the laws of economics.