You would want to pick a winner because the winner in some sectors will be in a position to extract economic rent, and by having it in public hands, we can ensu

You would want to pick a winner because the winner in some sectors will be in a position to extract economic rent, and by having it in public hands, we can ensure it either chooses not to do that, or it extracts economic rent and uses the resources to further the public interest. And by picking the winner via subsidies, you can achieve this publicly aligned winner without regulatory restrictions on competition. Any regulatory restriction on private parties violates basic liberties and thus is not justifiable IMHO. It also is a slippery slope to very destructive regulatory barriers to entry instated at the behest of incumbents. An attempt to pick the winner via subsidies also might not succeed, because even with subsidies, the public option may fail to gain significant market share. And in that case, it's fortunate that the winner wasn't subject to regulatory restrictions regimenting its behavior, as a government that is too incompetent to create a market winner via subsidies is also likely to be too incompetent to do an effective job at designing the regulatory restrictions imposed on the market leader. In short, with subsidies, all that you are risking is the subsidies themselves, in the event that they're allocated to an incompetent organization. You're not risking undermining the entire industry with dysfunctional regulatory regimentation.